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:

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:

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