20/10/2026
R254 000... the same risk premium, for 20 years..
A bond's interest rate is set on the day of registration, based on the bank's risk on that day. And day one is the bank's riskiest day. The loan is close to the property's value, there is no payment record yet and the bank only knows what is on paper.
Three years later the picture has changed completely. The rate has not...
Take a R4,2 million bond over 20 years at 10%. The instalment is R40 531 a month. If the bank cuts the rate by just half a percent after year three, that is worth R254 000 over the remaining 17 years. Keep paying the same instalment and the bond is settled more than a year earlier, saving closer to R600 000.
Consider what drove the pricing on day one: loan amount against property value, credit record, income. After three years the balance is lower and the property is worth more, so the bank's exposure has dropped.
The credit record is no longer a promise but 36 months of proof. Income has typically risen with inflation while the instalment stayed flat. Every risk factor has improved, yet the premium is paid for the full term.
I know the bank's answer. You can ask. You can refinance. Both are true. But the burden then sits with the owner who does not know he may ask, and refinancing costs attorney and registration fees that eat into the saving. A fair system does not wait for the client to stumble on the right question.
A fair system reviews itself.
It is the same lesson as insurance. A policy nobody reviews wastes money. A bond is the same lesson, just 20 years long and with more zeros.
See the 2 Scenarios attached. R2.5 Million and R4.2 Million...
My position, and my question to the banks: a bond's rate and risk profile should be reviewed automatically every two to three years, not only when the owner happens to ask.
When last did your bank review your rate without you asking?
PS: My team and I are building a platform that helps homeowners keep exactly these questions about their property in view, from bond to insurance to municipal valuation. If you would like to be among the first to know when it goes live, send an email to [email protected].
First to register, first to know.
