The financial situation for South African homeowners has become increasingly dire over the past two years, as reflected in the Reserve Bank’s Financial Stability Review. Rising interest rates and inflation have intensified household pressures, leading to a significant surge in residential mortgage defaults and broader financial instability.

Non-performing loans (NPLs) climbed from R257 billion in March 2023 to R304 billion by July 2024, raising the NPL ratio from 4.7% to 5.7%. By mid-2024, 7.8% of mortgage debtors were in arrears, a sharp increase from the historical average of 4.5% to 5%. Debt-servicing costs stabilised at 9.2% of disposable income in early 2024, declining marginally to 9% by the second quarter, yet households remain heavily strained.

The property market shows evidence of distress, with 23% of home sales in the third quarter of 2024 driven by financial difficulties, up from 21% in the prior quarter and above the long-term average of 18%. First National Bank (FNB) attributes this rise to unaffordable mortgage repayments amid escalating living costs.

Broader economic challenges, including stagnant wage growth, soaring inflation, and cumulative interest rate hikes of 475 basis points since late 2021, have left many households financially vulnerable. Essential expenses such as food, fuel, and utilities have surged, eroding disposable income.

The Reserve Bank warns that rising defaults threaten financial system stability, posing systemic risks. Until inflation and interest rates stabilise, the financial strain on homeowners will persist, requiring careful policy interventions to balance growth with financial stability.