If you're worried that today's lower home loan rates won't last, you can buy yourself peace of mind by opting for a fixed interest rate or "step-down" interest rate home loan.
These are interest rate packages which you can lock into for set periods, usually between 12 months and two years.
With the fixed rate package you pay a set interest rate for the entire period chosen. With the step-down package, your interest rate is reduced in stages over the period you have chosen.
Most people sign up for a home loan based on a fluctuating interest rate, which means that your monthly bond repayments go up and down -- as your home loan rate moves.
But fixed or step-down rates can be a boon for worried borrowers.
Borrowers who locked into fixed interest rates early last year were sitting pretty when the emerging market crises sent interest rates rocketing to 24 percent last September, while those on fluctuating rates were stretched, in many cases beyond their financial means.
At Standard Bank, for example, fixed rates in April 1998 were 16,5 percent for an 18-month period.
But borrowers who signed up for fixed or step-down packages when interest rates were high are not so happy. For example, NBS customers with loans of between R100 000 and R250 000 who took a loan of more than 90 percent of the value of the properties are still paying 19 percent if they locked into the 18-month option compared with the current home loan rate of 16,5 percent.
Remember that when you sign up for a fixed interest rate or step-down rate, you enter into a contract with the bank and there are usually penalties involved if you want to get out of the contract.
At Absa, if you want to get out of your contract, you are charged one percentage point more in interest than the rate you want to switch to for a period of a year. So, if you want to switch out of your fixed rate to the variable home loan rate currently at 16,5 percent, you would be charged 17,5 percent for one year.
Standard Bank charges a penalty of R1,80 for every R1 000 of the original loan amount for each remaining month of the contract. So, on R250 000 on a 24-month fixed rate at 20 percent with 10 months remaining you will pay finance charges of R4 500 (R1,80 x R250 000/1000 x10).
However, Standard Bank does offer customers the option of replacing their fixed rate contract with a new fixed rate contract at a more preferential rate.
Most economists expect interest rates to come down further over the next few months, but there is always the risk that events in the world economy will send interest rates soaring again.
So if you are looking for peace of mind and the ability to budget accurately, you could consider a fixed or step-down rate on your loan.