What a rate rise does to your bond

The 2022 to 2023 cycle added 4.75 percentage points in 20 months. Anyone who bought at the top of their budget in 2021 met a repayment they had never modelled. Testing plus two or three points is not pessimism about the future, it's a rerun of the recent past.

Almost every South African home loan tracks prime, and prime tracks the repo rate the SARB's Monetary Policy Committee sets. When the MPC moves, your repayment moves a few weeks later. This tool re-prices your bond at whatever shock you choose, holding the remaining term fixed, which is how banks normally adjust. Some lenders will extend the term instead to soften a rise, and that is worth asking about.

Three inputs, that's all:

• your outstanding balance, current rate and remaining term
• your monthly income, for the share-of-income gauge
• the size of the move to test, in percentage points

The slider runs negative too, so a cut is as testable as a rise.

The headline is your repayment after the move, with the rand increase against what you pay today. Beside it, the extra cost over the remaining term if the higher rate stays, and a gauge grading the new payment against your income. Banks stress-test around 30%, and the gauge marks that line. The rate-range chart plots your payment at every shock from minus two to plus four points, with today and your chosen shock flagged, so you can see where the payment stops being comfortable rather than guessing at it.

It does not forecast rates. Nobody can. It prices a move you choose, which is the only honest version of this question.

Money Cat is an information tool, not financial advice. Confirm any figure that matters with your bank, lender or a registered professional.