Rate hikes add N$4 000 a year to N$1m mortgage

The Bank of Namibia’s two interest rate increases this year could leave many homeowners paying thousands more on their loans, with an extra N$334 a month on a N$1 million mortgage adding up to about N$4 000 over a year.Households with several loans will feel the strain more acutely, as they face higher repayments on their homes, vehicles and other debts.A household with an outstanding mortgage of N$1 million and a vehicle loan of N$300 000, for example, could face about N$408 in additional monthly repayments following the two increases announced in June and October.That amounts to nearly N$4 900 a year, money that could otherwise go towards groceries, school costs, electricity, transport and other household needs.The central bank raised the repo rate by 25 basis points in June and again on 28 October, taking it from 6.5% to 7%.The corresponding prime lending rate rose from 10% to 10.5%, affecting borrowers whose loans are linked to the prime rate.Feeling the pinchTo illustrate, a homeowner with an outstanding mortgage of N$1 million and 20 years remaining would have paid approximately N$9 650 monthly before the June increase.In the example, the repayment rose to about N$9 816 after the first adjustment and N$9 984 following the October decision.The combined increase of approximately N$334 may appear modest when considered as a single monthly payment. However, its effect on household finances becomes clearer when measured over longer periods.At the latest repayment level, the homeowner would pay about N$4 000 more over a full year than before the June increase.If the additional monthly repayment remained unchanged, it would add up to approximately N$20 000 over five years. The actual amount, however, would depend on future interest rates and the outstanding mortgage balance.The increases have a greater financial impact on households with larger outstanding mortgages.Someone owing N$1.5 million over 20 years could see monthly repayments increase by approximately N$500, equivalent to N$6 000 over a full year at the latest rate.A homeowner with a N$2 million outstanding mortgage could pay approximately N$667 more every month, adding about N$8 000 to annual repayments.The additional cost would approach N$40 000 over five years if the monthly increase remained unchanged.Borrowers with smaller mortgages are not spared. A person owing N$500 000 over 20 years could pay approximately N$167 more monthly, or about N$2 000 annually.A motorist with an outstanding vehicle loan of N$300 000 and five years remaining could pay approximately N$74 more every month following the combined increases, equivalent to nearly N$890 annually.Households with personal loans, business loans or overdrafts could face even higher repayments, as these costs are not included in the calculation.More pain for borrowersThe Bank of Namibia (BoN) first increased the repo rate from 6.5% to 6.75% on 17 June 2026.The monetary policy committee maintained the rate at 6.75% in August before unanimously approving another 25-basis-point increase on 28 October, taking it to 7%.BoN governor Ebson Uanguta said the October decision was intended to protect the Namibia dollar's one-to-one exchange rate arrangement with the South African rand and contain inflationary pressures associated with rising fuel prices.“This policy stance is deemed appropriate to safeguard the one-to-one link between the Namibia dollar and the South African rand and mitigate against second-round effects induced by high fuel prices,” Uanguta said.He also highlighted the importance of narrowing the interest rate gap between Namibia and South Africa to discourage capital outflows and protect the country's international reserves.Namibia's annual inflation rate increased to 5.4% in September from 4.4% in June, adding to the pressure on households already facing higher borrowing costs.The central bank expects inflation to average 4.2% in 2026, compared with 3.5% in 2025, before moderating to 4% in 2027.The annual impact of the two increases will be felt from 2027 if interest rates remain unchanged.The June increase affected repayments during the second half of 2026, while the October adjustment came with just two months of the year remaining.A homeowner whose monthly repayment increased by N$334 following both decisions would therefore not have paid the full N$4 000 extra this year.The calculations are based on loans charged at the prime lending rate, with monthly repayments adjusted while the remaining loan periods stay unchanged. Actual increases will differ depending on individual loan agreements.

Rate hikes add N$4 000 a year to N$1m mortgage

Comments

Namibian Sun 2026-11-02

Please login to leave a comment

Rate hikes add N$4 000 a year to N$1m mortgage

Comments

Namibian Sun 2026-11-02

Please login to leave a comment

Subscription Required to Access Content ×

Subscription Required to Access Content