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. <\/p>\n\n\n\n
The MPC’s decision marked the first time since May 2023 that the committee has changed rates, which aligned with economist and analyst expectations. <\/p>\n\n\n\n
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. <\/p>\n\n\n\n
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. <\/p>\n\n\n\n
The latest inflation print for South Africa was 4.4% – a three-year low and below the SARB’s midpoint target of 4.5%. <\/p>\n\n\n\n
The rate cut follows similar moves from other international central banks, such as the US FED, which cut interest rates by 50 basis points. <\/p>\n\n\n\n
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.<\/p>\n\n\n\n
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. <\/p>\n\n\n\n
Savings <\/strong><\/p>\n\n\n\n With the latest cut, South African homeowners can expect monthly savings on their bonds. <\/p>\n\n\n\n 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.<\/p>\n\n\n\n The latest data from ooba Home Loans shows that the average house in South Africa costs R1,458,924. <\/p>\n\n\n\n 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. <\/p>\n\n\n\n For a bond of R750,000, the monthly repayment decreased by R130 to R7,998 monthly.<\/p>\n\n\n\n For a R5 million rand house, the monthly repayment dropped by R864 to R53,321. <\/p>\n\n\n\n The savings on bonds for properties prices between R750,000 and R5 million can be found below:<\/p>\n\n\n\n <\/p>\n\n\n\nValue of the bond (20 years)<\/th> Jul 2024 (11.75%)<\/th> Sep 2024 (11.50%)<\/strong><\/td> Change<\/strong><\/th><\/tr> R750 000<\/td> R8 128<\/td> R7 998<\/td> -R130<\/mark><\/td><\/tr> R800 000<\/td> R8 670<\/td> R8 531<\/td> -R139<\/mark><\/td><\/tr> R850 000<\/td> R9 212<\/td> R9 065<\/td> -R147<\/mark><\/td><\/tr> R900 000<\/td> R9 753<\/td> R9 598<\/td> -R155<\/mark><\/td><\/tr> R950 000<\/td> R10 295<\/td> R10 131<\/td> -R164<\/mark><\/td><\/tr> R1 000 000<\/td> R10 837<\/td> R10 664<\/td> -R173<\/mark><\/td><\/tr> R1 458 924 (AVG)<\/strong><\/td> R15 810<\/strong><\/td> R15 558<\/strong><\/td> -R252<\/strong><\/mark><\/td><\/tr> R1 500 000<\/td> R16 256<\/td> R15 996<\/td> -R260<\/mark><\/td><\/tr> R2 000 000<\/td> R21 674<\/td> R21 329<\/td> -R345<\/mark><\/td><\/tr> R2 500 000<\/td> R27 093<\/td> R26 661<\/td> -R432<\/mark><\/td><\/tr> R3 000 000<\/td> R32 511<\/td> R31 993<\/td> -R518<\/mark><\/td><\/tr> R3 500 000<\/td> R37 930<\/td> R37 325<\/td> -R605<\/mark><\/td><\/tr> R4 000 000<\/td> R43 348<\/td> R42 657<\/td> -R691<\/mark><\/td><\/tr> R4 500 000<\/td> R48 767<\/td> R47 989<\/td> -R778<\/mark><\/td><\/tr> R5 000 000<\/td> R54 185<\/td> R53 321<\/td> -R864<\/mark><\/td><\/tr><\/tbody><\/table><\/div>
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