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Rent or buy? It’s cheaper to buy than rent right now

Owning is better than renting, especially after the 2020 interest rate cuts, which save money for homeowners, while renters pay the same rent.

Renting vs buying a house

Article summary

  • Owning a home has many advantages over renting one.
  • One advantage is that the cost of your monthly repayments decrease with interest rate cuts, whereas a fixed rent remains the same. The interest rate cuts that kicked off 2020 mean homeowners are saving money while renters could be paying inflated prices.
  • If you’re a first-time home buyer, low interest rates and high supply makes now a good time to get involved in the buyer’s market.

Congratulations! You’re thinking about buying your first home.

While you may be a little apprehensive about taking “the next big step”, rest assured that it’s a step in the right direction. Besides the fact that owning your own home has distinct advantages over renting, it also happens to be a more cost-effective alternative thanks to recent interest rate cuts.

Interest rate cuts favour home owners

So you see the advantage in home ownership but you’ve resigned yourself to the rent trap? Well, home buying is a more realistic process than it’s been in a while. Supply outstrips demand, and banks are more willing to lend. This has introduced options such as the 100% home loan, where you don’t have to pay a deposit.

Aside from that, as of November 2022, the prime interest rate is 10.5%. Home owners will find themselves paying less per month on their bond repayments. For example, on a bond of, say, R1 000 000, your repayment amount will have dropped from R9 650 at the beginning of January, to R7 753 after the rate cut in September 2020.

Why the interest rate cuts make it a good time for buy-to-let

More millennials are entering the property market, but research from Momentum Corporate shows that only 40% of millennials are interested in home ownership. They’ve been tagged as ‘Generation Rent’ for a reason.

This is all good news for landlords, as millennials form a ready-made market for buy-to-let properties.

Add to that, the interest rate cuts mentioned above allow property owners to save money on their bond repayments while renters continue to pay a fixed (and now possibly inflated) rent.

So the interest rate cuts provide a direct advantage over renters for home owners, allowing them to derive maximum benefit from buy-to-let.

Renting vs buying: Pros & cons

Here, we weigh up the advantages of buying over renting:



Con: If the value of the property rises, you may have to pay more in rent.

Pro: If the value of the property rises, the value of your personal wealth should also increase and you’re more likely to make a profit if you sell it.

Pro: Building maintenance is your landlord’s responsibility.

Con: You need to budget for building maintenance and repairs, although any improvements made to your home will likely increase the value of your investment.

Pro: Your rent is fixed for the term of the lease – usually six to 12 months.

Con: Your home loan repayments may fluctuate – both rising and falling with interest rate changes, if you opt for a variable interest rate.

Con: Interest rate cuts, such as the three previous cuts in March, April and May 2020, benefit your landlord while possibly leaving you with inflated rent prices.

Pro: Interest rate cuts mean you save money on your home loan repayments but still make the same on any rental income, meaning higher profits for you.

Con: You’re paying off someone else’s home loan.

Pro: Your property is likely to be an appreciating asset, especially over the long term, and it could even be used as an investment property in the future.

Pro: Your monthly rent payment may be less than bond repayments, especially if you’re sharing.

Con: Your bond repayments may be more than the rent you could pay to live in the same area, but paying off a home loan is a form of saving as you are building equity in a valuable asset.

Con: You don’t have any certainty of tenancy control beyond the term of your rental agreement.

Pro: The property is yours to live in as long as you want to.

Con: You have limited options to personalise the property.

Pro: Generally you can do anything you like with the decor and outdoor areas (subject to council or body corporate approval), and any improvements are likely to enhance your lifestyle and increase the value of your home.

Escape the rent trap

When it comes to getting on the property ladder, sooner is best. Better to not fall into the comfort zone of renting, and for first-time buyers to take advantage of things like low interest rates to take their first step onto the property ladder. Furthermore, if you intend to buy-to-let, the income from rent can be used to pay off your home loan.

If you’re convinced that property ownership is the way to go, bear in mind that ooba Home Loans, South Africa’ largest home loan comparison service, can make the home buying process easier by offering a range of tools. Start with our bond calculator; then use the ooba Bond Indicator to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.

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