Ways to reduce household spending after an interest rate hike

Interest rates rose 25 basis points at the last MPC meeting in March, leaving the primary lending rate at 7.75%.

As the effects of this increase begin to be felt, households will most likely have to find ways to reduce spending to afford the higher debt repayment.

Rising fuel and food costs, as well as higher debt repayments resulting from the latest interest rate hike, will no doubt put pressure on household budgets.

While an effort may be needed to reduce household expenses, homeowners should always prioritize keeping up with bond repayments to avoid the risk of their home being repossessed by the bank.

There are several options homeowners might consider to reduce monthly household expenses.

The simplest, but often less desirable option would be to cancel any essential subscription, for example Netflix/ Spotify / iTunes / Game Pass / Showmax / DStv.

All of these small rental subscriptions don’t seem like much on their own, but as collectives, these amounts can stack up a lot more than many homeowners realize.

Homeowners should also consider that, depending on the size of the home loan, canceling just one of these subscription services may be enough to cover the increased bond repayment caused by rising interest rates. .

According to BetterBond, on a home loan of R1 million taken over a 20-year period, the monthly installment increased by R153 following the March interest rate hike, which is close to the cost of many of these services. subscription.

For those who don’t have subscription services to cancel, homeowners can downgrade their mobile phone contracts or switch to pay-as-you-go options.

Those not working from home might also consider downgrading their home internet connection.

There are also more sustainable options that homeowners might consider that would be good for both the planet and their pockets.

Find ways to lower your household grocery bill by creating a vegetable garden at home where you can grow your own supplies.

This can help minimize the packaging waste that results from a trip to the grocery store.

Homeowners may also find ways to lower their electricity bills by practicing more responsible energy use practices, such as setting the geyser on a timer and unplugging all appliances when not in use.

The same goes for the water bill. Homeowners could lower costs by lowering their consumption. Examples include reusing gray water to irrigate the garden and only laundry when it is fully loaded.

There are also slightly more complicated options homeowners could explore to cut down on household expenses, including shopping for a cheaper life, a home and car insurance policy, or a more affordable medical care policy.

This might take a bit of research and paperwork, but it could knock off a couple of hundred monthly installments which may be all you need to cover the costs of the latest interest rate hike.

Even if homeowners are not yet in the position where there is a need to reduce their expenses, it is always a good idea to review household expenses and consider where you can cut to make more room for saving or paying off debts.

We are in the midst of an interest rate hike, so we are likely to see further interest rate hikes later in the year.

It is always best to be prepared and have some savings to rely on if you ever find yourself in a difficult financial situation.

Those who have no savings in place and are unable to reduce expenses to keep up with repayments on the home should speak to a real estate professional and explore the option of downsizing or renting a portion of their home for additional income from. get them through this difficult financial season.