The gap between what you pay in interest on your overdraft and what you pay on your homeloan is closing, following a cut in interest rates by the banks this week.
But it is still cheaper to borrow money on a homeloan, rather than go into overdraft or take out a personal loan.
Before the introduction of the repo rate system, which replaced the old bank rate in March this year, home loans rates were 0,25 percentage points below the prime rate. In August this year, prime rates peaked at 25,5 percent and home loans at 24 percent.
Most of the banks this week dropped their prime lending rates (what banks give to their best customers) by half a percentage point to 23 percent. This does not mean that you necessarily qualify for this rate. Your bank may have quoted you prime plus one, or two or three percentage points. But when the bank's prime rate drops, the interest rate you are paying also drops by the same amount.
This week only Absa Bank and NBS/Boland lowered home loan rates. Absa cut mortgage bond rates to 22,5 percent and NBS/Boland to 23. This makes Absa the only one of the big four banks offering a base home loan rate under 23 percent. First National, Mercantile, Nedcor and Standard kept their home loan interest rates at 23 percent.
Remember, what you pay on your home loan depends on what you negotiated with your bank.
INTEREST RATES FROM MONDAY
BANKBASE HOME LOAN RATEPRIME RATE
Absa22,50%23,00%
BoE Private Bank21,00%23,00%
First National Bank23,25%23,00%
Investec23,25%23,00%
Mercantile Bank23,00%23,00%
NBS/Boland23,00%23,00%
Nedcor (Perm, Nedbank & People's Bank)23,25%23,00%
Saambou23,00%23,00%
Standard Bank23,00%23,00%