How much you’ll save on your bond after the latest interest rate cut in South Africa

The Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) has reduced interest rates, leading to savings on bond repayments for South Africans.

The MPC’s decision marked the first time since May 2023 that the committee has changed rates, which aligned with economist and analyst expectations.

The repo rate is now at 8.00%, and the prime lending rate has dropped to 11.50%. The decision to cut rates was unanimous among the MPC’s six members.

Reserve Bank governor Lesetja Kganyago said that the MPC reached a consensus of a 25 basis points, agreeing that a less restrictive stance was consistent with sustainably lower inflation over the medium term.

The latest inflation print for South Africa was 4.4% – a three-year low and below the SARB’s midpoint target of 4.5%.

The rate cut follows similar moves from other international central banks, such as the US FED, which cut interest rates by 50 basis points.

South African assets have performed relatively well recently, with the rand strengthening more than its peer countries, while long-term yields have moderated and spreads over US rates have narrowed.

Kganyago added that the SARB’s forecast sees rates moving towards neutral next year, stabilising slightly above 7%, implying that another 75-100 basis point cuts are on the horizon for South Africa.

Savings

With the latest cut, South African homeowners can expect monthly savings on their bonds.

Although a bond’s value, length, and interest rate can vary, we have looked at the 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 shows that the average house in South Africa costs R1,458,924.

With the price drop, the average bond repayment dropped from R15,810 per month to R15,558 per month – a saving of R252 per month.

For a bond of R750,000, the monthly repayment decreased by R130 to R7,998 monthly.

For a R5 million rand house, the monthly repayment dropped by R864 to R53,321.

The savings on bonds for properties prices between R750,000 and R5 million can be found below:

Read: What needs to happen to get the rand back to R14 to the dollar