Bond switching is becoming more relevant for South African homeowners as banks compete to retain reliable home loan customers. But before moving your bond to another bank, it is important to understand the costs, benefits and risks.
What is bond switching?
Bond switching refers to moving your existing home loan from one bank to another.
Why do people consider switching their bond from one supplier to another? “Briefly because they can secure a lower interest rate, consolidate all their debt with one home loan provider, or access better customer service,” says Grant Phillips, Group CEO of e4, the digital transformation specialist company that works with leading blue chip companies in the property sector.
For homeowners who are reviewing their finances, it may also be useful to understand how a home loan works and how interest affects long-term repayments.
Why bond switching is gaining attention
With clients such as Absa, Nedbank, African Bank, Standard Bank, Investec, FNB, Sanlam Investments, and SA Home Loans, as well as a large number of conveyancers and estate management companies, e4 has made it a priority to closely monitor trends in the property market.
For example, e4’s data reveals that in 2024, 2.9 million home loans were processed, R2.8 trillion in home loans were registered, and 75 994 491 data searches were performed.
More recently, e4 has picked up on a potential rising trend: the way consumers think about their home loans.
“Where once a bond was seen as something you held onto for life, more and more South Africans are now shopping around for better rates and terms,” says Phillips.
“Over the past year there's been an increase in bonds being switched that aren't linked to new home loan transactions. This is something that lenders, historically, have never had to deal with, as very few, if any, have considered repricing consumers who have been diligently paying down and servicing their bonds for 10 years or more.”
Phillips says lenders are now realising the need to retain lower-risk customers who have proven themselves over time, but have not necessarily benefited from their improved risk profile.
Why homeowners may be in a stronger position
Phillips indicates that consumers who can manage their debt may be in a better negotiating position with their home loan providers in a more competitive lending environment, and banks are likely to view these individuals as valuable clients in the months and years to come.
If they do not, they may face losing a number of home loan accounts to competitors.
For homeowners, even a small difference in the interest rate can affect the total cost of a bond over time. Before switching, homeowners should compare their existing repayment with the new proposed repayment, and also factor in once-off switching costs.
Private Property’s guide on how to use a bond calculator can help homeowners understand how rate changes may affect monthly repayments.
How bond switching works in South Africa
Bond switching is a common practice in countries like the UK and the US, where consumers switch bonds multiple times over the life of a home. South Africa has traditionally seen little of this behaviour, but that is changing, largely thanks to new players in the market targeting prime customers with incentives to make the switch.
One of the ways they are doing this is by absorbing some of the legal and administrative costs associated with switching a home loan, such as bond cancellation and bond registration fees, which are required when moving to a new home loan provider.
“This has traditionally been a significant barrier to switching for many consumers. However, banks are now reviewing cases where the loan-to-value ratio is low, and the risk to the bank is minimal,” says Phillips.
What costs should homeowners consider?
Before switching your bond, ask the new bank or bond consultant for a full cost breakdown. These costs may include:
- Bond cancellation fees with your existing bank.
- Early termination fees, if you did not give your current bank enough notice.
- Bond registration costs with the new bank.
- Attorney or conveyancing fees.
- Possible admin or initiation fees.
Transfer duty does not apply to bond switching because ownership of the property does not change. However, homeowners may still need to pay bond cancellation, bond registration and attorney costs. You can read more about transfer duty in Private Property’s guide to transfer duty in South Africa.
When bond switching may make sense
Bond switching may be worth considering if:
- You can secure a meaningfully lower interest rate.
- The long-term repayment saving is greater than the switching costs.
- Your credit profile has improved since you first took out your bond.
- Your property value has increased and your loan-to-value ratio has improved.
- Another bank offers better service, flexibility or access to useful features.
- You want to consolidate your banking and home loan with one provider.
It is also worth reviewing how much of your income is going towards your home loan. Private Property’s article on how much of your income should go to a home loan explains how homeowners can assess whether repayments are still affordable.
When bond switching may not be worth it
Bond switching may not make financial sense if the saving is small, the costs are high, or you plan to sell the property soon.
It may also be less useful if the new offer comes with conditions that reduce flexibility, such as higher insurance requirements, additional products, or longer repayment terms that lower the monthly payment but increase the total interest paid over time.
Before making a decision, compare:
- Your current interest rate versus the new offered rate.
- The remaining term on your existing bond.
- The new repayment term.
- The total cost of switching.
- The total interest payable over the full loan period.
What FNB says about bond switching
Whilst FNB reports that it hasn’t seen a “dramatic” spike in bond switching inquiries over the past year, it remains focused on offering compelling reasons for homeowners to make the move, and this includes its digital services.
FNB Home and Structured Lending Product Manager Sfiso Mahlangu explains that the bank concentrates on offering compelling reasons for homeowners to make the move.
“Whether looking for better rates, more flexibility, or simply a more rewarding banking experience, FNB is positioning itself as the go-to choice for property owners.”
Switching may be more manageable when the new bank assists with the process and costs. For example, FNB helps to cover the costs of attorney bond cancellation fees, excluding early termination fees from the current bank, and covers bond registration costs up to the original bond amount, capped at R10 million.
It also offers repayment periods of up to 30 years, and if main-banked with FNB, the customer may qualify for a 0.25% interest rate discount, plus a personalised interest rate. There are other benefits such as eBucks and equity access facilities.
“Similarly, and insofar as rewarding our existing customers, we also offer competitive interest rates. FNB also facilitates eBucks rewards that add real value to the customers’ home loan experience, while the nav»Home feature on the FNB App offers a personalised, proactive way to manage a home loan right from the customer’s phone,” says Mahlangu.
Those who have switched to FNB have done so because of lower interest rates, better customer service, and access to equity in their property.
“The convenience of consolidating financial products and more flexible loan terms and repayment options are also cited as reasons,” he says.
Digital banking and the future of bond switching
As bond switching becomes more of a key focus for banks, particularly in how they package the home loans they offer, including insurance, solar installations, renovation loans, and other value-adds and rewards systems, digital facilitation is essential.
Not only should banks note that customers are looking for instant answers and approvals, but also for those that go the extra mile.
This shift is part of a broader move towards more digital, transparent and customer-led home loan services. Private Property has also covered how digital home loan applications are making the property journey easier for buyers and homeowners.
Questions to ask before switching your bond
Before agreeing to switch your bond, ask:
- What interest rate am I currently paying?
- What new rate is being offered?
- What will my new monthly repayment be?
- What are the total once-off switching costs?
- Will the new bank cover any of these costs?
- Will my loan term be extended?
- How much will I save over the full term of the loan?
- Are there any conditions attached to the offer?
The takeaway
Bond switching may benefit some homeowners who have built up a strong repayment history, improved their credit profile, or gained more equity in their property.
However, the decision should not be based on the interest rate alone. Homeowners should compare the total saving against the full cost of switching and consider whether the new home loan structure supports their long-term financial goals.
If the numbers work in your favour, switching your bond could help reduce monthly repayments, improve service, unlock added benefits, or give you more flexibility in how you manage your home loan.
FAQs about bond switching
Is bond switching the same as selling my home?
No. Bond switching means moving your existing home loan from one bank to another. The ownership of the property does not change.
Can switching my bond lower my monthly repayment?
Yes, if the new bank offers a lower interest rate or different repayment terms. However, you should check the total cost of switching before deciding.
Do I need to pay transfer duty when switching my bond?
No. Transfer duty does not apply to bond switching because property ownership does not change. Bond switching may still involve bond cancellation, registration and attorney costs.
Should I speak to my current bank before switching?
Yes. Your current bank may be willing to review your interest rate or offer better terms to retain you as a customer.
