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

The South African Reserve Bank (SARB) has reduced the repo rate by 25 basis points, providing another dose of financial relief for homeowners and prospective buyers.

This decision, announced after the Monetary Policy Committee (MPC) meeting, brings the repo rate down to 7.75% and the prime lending rate to 11.25%.

The unanimous decision aligns with market expectations and reflects the SARB’s cautious optimism amid a shifting economic landscape.

Governor Lesetja Kganyago emphasised the importance of a measured approach to future interest rate adjustments, citing external risks such as global rate hikes and fluctuations in the rand.

Despite this caution, the outlook suggests further rate cuts are possible, with the forecast indicating potential stabilisation of the repo rate slightly above 7%.

South Africa’s inflation rate has seen a dramatic decline, dropping to 2.8% in October 2024 from 3.8% in September—the lowest level since February 2021.

This sharp decline has strengthened the case for rate cuts, fostering optimism across the property sector.

According to Andrew Golding, CEO of the Pam Golding Property Group, the interest rate reduction marks a turning point for the housing market, especially for first-time buyers.

He highlights that affordability is improving, with more young buyers transitioning from renting to owning homes.

Gauteng, a region where house prices have struggled, has already seen increased activity, with similar trends emerging in the Free State and Mpumalanga.

Golding also notes that lower interest rates boost various buyer demographics, including those looking to downsize or relocate.

S&P Global’s recent upgrade of South Africa’s economic outlook from neutral to positive has also buoyed confidence.

This shift, attributed to structural reforms and fiscal discipline, hints at long-term improvements in the country’s economic trajectory.

Golding expects the property market to benefit from these dynamics, anticipating up to 100 basis points in rate cuts over the next year.

Samuel Seeff, chairman of the Seeff Property Group, shares Golding’s optimism but urges more aggressive monetary easing.

He contends that while the 25-basis-point cut is welcome, a 50-basis-point reduction would have provided a more substantial economic stimulus.

The current prime rate of 11.25% contrasts sharply with the 9.75% seen before the pandemic, underscoring the potential for further cuts to stimulate growth.

Seeff foresees the property market gaining momentum in 2025, with increased demand leading to higher sales volumes and gradual price recovery in areas like Gauteng and Mpumalanga, which currently experience surplus stock.

Coastal regions and parts of the Western Cape, where demand already outpaces supply, could see price growth of 15% to 20% next year.

However, Seeff emphasises that sustained economic growth and job creation are critical for the market’s long-term recovery.

Chris Tyson, CEO of Tyson Properties, praises the SARB’s second consecutive rate cut but advises homeowners to remain cautious.

He recommends that borrowers use the savings from lower interest rates to accelerate their bond repayments.

Savings

By maintaining higher monthly payments, homeowners can reduce their loan terms and save significantly on interest costs over time.

The immediate financial impact of the rate cut is tangible.

Data from Ooba Home Loans shows that a 25-basis-point reduction translates to monthly savings of R171 on a R1 million bond and R344 on a R2 million bond.

For the average South African home priced at R1.46 million, the monthly repayment decreases by R250, providing much-needed relief to households.

The latest interest rate cut signals optimism for the South African property market and the broader economy.

While uncertainties remain, the combination of lower rates, easing inflation and renewed confidence points to a brighter 2025.

Homeowners and buyers are encouraged to seize the opportunities presented by the current rate cycle while preparing for potential challenges ahead.

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

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