R303 per month saving for the average household in South Africa – with more relief around the corner
The Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) has recently cut interest rates, reducing the country’s average mortgage and bond repayments by a combined R303 per month.
The MPC cut interest rates earlier this month for the first time since 2020, which aligned with economists’ and analysts’ expectations.
Reserve Bank governor Lesetja Kganyago said that the MPC reached a consensus of a 25 basis point cut, believing that a less restrictive stance was consistent with sustainably lower inflation expectations over the medium term. Inflation hit a three-year low of 4.4% in August.
The repo rate now is 8.00%, and the prime lending rate is 11.50%.
The rate cut follows similar moves from central banks worldwide. The US Fed also decided to cut interest rates by 50 basis points when it met a day before the MPC.
South African assets have performed relatively well in recent months, strengthening the rand more than its peer emerging market economies. Meanwhile, long-term yields have moderated, and spreads over US rates have narrowed.
Kganyago said that the Reserve Bank’s forecast shows rates moving towards neutral territory next year, stabilising slightly above 7%. This implies that another 75-100 basis point cuts are approaching for South Africa.
In the meantime, South African households can expect a R303 cut in their debt repayments for their houses and cars.
Home loans
As every bond differs, we have decided to look at the possible savings that a 20-year bond with no deposit and a prime interest rate will receive following the latest cut.
The latest data from ooba Home Loans showed that the average house in South Africa costs R1,458,924.
With the price drop, the bond repayment for the average house dropped from R15,810 per month to R15,558 per month – a saving of R252 per month.
The savings on bonds for properties prices between R750,000 and R5 million can be found below:
Value of the bond (20 years) | Jul 2024 (11.75%) | Sep 2024 (11.50%) | Change |
---|---|---|---|
R750 000 | R8 128 | R7 998 | -R130 |
R800 000 | R8 670 | R8 531 | -R139 |
R850 000 | R9 212 | R9 065 | -R147 |
R900 000 | R9 753 | R9 598 | -R155 |
R950 000 | R10 295 | R10 131 | -R164 |
R1 000 000 | R10 837 | R10 664 | -R173 |
R1 458 924 (average) | R15 810 | R15 558 | -R252 |
R1 500 000 | R16 256 | R15 996 | -R260 |
R2 000 000 | R21 674 | R21 329 | -R345 |
R2 500 000 | R27 093 | R26 661 | -R432 |
R3 000 000 | R32 511 | R31 993 | -R518 |
R3 500 000 | R37 930 | R37 325 | -R605 |
R4 000 000 | R43 348 | R42 657 | -R691 |
R4 500 000 | R48 767 | R47 989 | -R778 |
R5 000 000 | R54 185 | R53 321 | -R864 |
Car Loans
Like home loans, the terms of a car loan depend on several factors, so we have looked at the value of a loan with no deposit or trade-in and a prime-linked interest rate over a 60-month term.
WesBank said the average amount for a new vehicle it finances was approximately R410,000.
With the latest cut in interest rates, the average South African car purchaser would thus save R51 monthly on car repayments.
The savings on vehicles following the latest interest rate decrease can be seen below:
Value of the car | July Rate (11.75%) | Sep Rate (11.50%) | Change |
---|---|---|---|
R175 000 | R3 966 | R3 944 | -R22 |
R200 000 | R4 519 | R4 494 | -R25 |
R225 000 | R5 072 | R5 043 | -R29 |
R250 000 | R5 625 | R5 593 | -R32 |
R275 000 | R6 178 | R6 143 | -R35 |
R300 000 | R6 731 | R6 693 | -R38 |
R350 000 | R7 837 | R7 793 | -R44 |
R400 000 | R8 943 | R8 893 | -R50 |
R410 000 (Average) | R9 164 | R9 113 | -R51 |
R450 000 | R10 049 | R9 992 | -R57 |
R500 000 | R11 155 | R11 092 | -R63 |
R550 000 | R12 261 | R12 191 | -R70 |
R600 000 | R13 367 | R13 291 | -R76 |
R650 000 | R14 473 | R14 391 | -R82 |
R700 000 | R15 579 | R15 490 | -R89 |
R750 000 | R16 684 | R16 590 | -R94 |
R800 000 | R17 790 | R17 689 | -R101 |
R850 000 | R18 896 | R18 789 | -R107 |
R900 000 | R20 002 | R19 888 | -R114 |
R950 000 | R21 108 | R20 988 | -R120 |
R1 000 000 | R22 214 | R22 088 | -R126 |
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