What precisely constitutes an interest rate, and how does it impact the repayment of your bonds?

The interest rate holds significant importance when purchasing a home as it determines the minimum monthly payments for your mortgage, directly impacting your cashflow and potentially influencing the affordability of the property.

So, what exactly is the interest rate and how does it affect your bond repayments?

Interest rates are the percentages at which banks lend money. There are various types of lending rates, depending on the source of the funds.

These rates serve as the building blocks for the specific interest rate applied to your mortgage. Here’s a breakdown of the process:

  1. Repo rate: The South African Reserve Bank, the central bank of our country, charges commercial banks when they borrow money. This rate is known as the repo rate and currently stands at 11.75% (as of 26 May 2023).
  2. Prime lending rate: Commercial banks add a margin to the repo rate to cover their costs. This additional amount is referred to as the prime lending rate, which currently stands at 10.5% (as of 24 November 2022). However, banks still aim to make a profit on top of this rate. Therefore, when considering whether to lend to you, they assess your financial history to determine your risk level as a client.
  3. Interest rate: This is the rate at which you will repay the mortgage amount provided by the bank. It is influenced by your credit record and may vary between different banks. Hence, it is crucial to compare offers from various banks to secure the most favorable interest rate, similar to comparing prices for plane tickets.


The quest for a lower interest rate: Obtaining the lowest possible interest rate should be a primary goal, achievable by maintaining a good financial track record. By demonstrating responsibility and organizing your finances before applying for a loan, you can positively influence the interest rate offered by banks. A lower interest rate provides the following advantages:

  1. Long-term savings: It leads to significant savings over the course of the loan.
  2. Short-term affordability: It reduces the burden on your finances by resulting in smaller monthly repayments.
  3. Accelerated loan repayment: Any extra funds you contribute to your mortgage will have a greater impact in reducing the overall loan amount because less interest will accumulate. Ensure that your loan terms allow for such additional payments to avoid penalties.


Harnessing the power of the interest rate: To position yourself for the best possible home loan deal, it is advisable to utilize a reputable bond originator such as O-YES Home Loans, which incurs no cost to you. Remember, banks are competing entities vying for your business.

Therefore, it is wise to compare offers from multiple banks to determine the most favorable interest rate. O-YES Home Loans can assist you in this process by engaging with up to nine different banks on your behalf.

Our data indicates that, on average, our clients save 0.5% on their interest rate by utilizing our services to secure their home loans. To calculate your potential interest rate savings, you can click here.

Clearly, paying attention to the interest rates affecting your mortgage is crucial as they directly impact your financial situation.