All South Africans want for Christmas is an interest rate cut SARB

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The South African Reserve Bank’s (SARB’s) monetary policy committee (MPC) will meet for the sixth and final time in 2024 on Thursday, 21 November.

And after a financially difficult year for many, there’s expected to be some GOOD news for those South Africans in debt.

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As reported by The South African website, with annual consumer inflation having cooled for a fourth consecutive month in September, economists are bullish about a 50 basis point cut next week.

Wouldn’t that be an ideal early Christmas present!

Such a scenario would mean lower monthly bond repayments for homeowners – and good news for those looking to enter the property market for the first time.

However, as detailed by The South African website, paying less per month in bond repayments is NOT always the smart thing to do!

Here’s WHY

Finance debt

As a quick reminder, there was welcome news when the SARB’s six-member monetary policy committee cut the interest rate by 25 basis points at their most recent meeting in late September.

That saw the repo rate drop to 8% while the prime lending rate stands at 11.50%.

The MPC had hiked interest rates by a total of 475 basis points since 2021, despite keeping the rate unchanged for the prior seven meetings – until the most recent announcement.

That had represented a 15-year high (since 2009) and had several South Africans struggling to finance their debt.

What would a 50 basis point cut mean in monetary terms?

By way of an example (see graph below), following the interest rate cut in September, 20-year repayments at prime (11.5%) on the average house bond in South Africa of R1 458 924 currently costs R15 558 per month to finance.

Should the SARB cut that prime lending rate by 50 basis points to 11%, that would mean a monthly bond repayment of R15 059.

That represents a monthly saving of R499.

Over the course of 20 years (240 months), that equates to a total saving of R119 760 – on the (unlikely) assumption that there are no further rate changes during that period.

But here are the scary numbers …

To finance a R1 458 924 bond over 20 years at the forecast prime lending rate (11%) will NOT cost R1 458 924.

In fact, it will cost a staggering R3 614 123.

Do the sums yourself:

R15 059 x 240 months = R3 614 160 (give or take a few rands)

Monthly bond repayment table

The South African website’s table below compares current monthly bond repayments on various bond values over a 20-year period assuming no deposit and repayments at prime, to the potentially new cost after this month’s expected 50 basis point cut – and the monthly saving that would entail:

Bond	Current (11.5%)	New (11%)	Saving
R750 000	R7 998	R7 741	R257
R800 000	R8 531	R8 258	R273
R850 000	R9 065	R8 774	R291
R900 000	R9 598	R9 290	R308
R950 000	R10 131	R9 806	R325
R1 000 000	R10 664	R10 322	R342
R1 458 924	R15 558	R15 059	R499
R1 500 000	R15 996	R15 483	R513
R2 000 000	R21 329	R20 644	R685
R2 500 000	R26 661	R25 805	R856
R3 000 000	R31 993	R30 966	R1 027
R3 500 000	R37 325	R36 127	R1 198
R4 000 000	R42 657	R41 288	R1 369
R4 500 000	R47 989	R46 448	R1 541
R5 000 000	R53 321	R51 609	R1 712

SARB MPC MEETING DATES FOR 2024

The MPC meets every second month.

The SARB’s final meeting of the year will take place on Thursday, 21 November at 15:00.

Month	Date
January	25 January – No rate change
March	27 March – No rate change
May	30 May – No rate change
July	18 July – No rate change
September	19 September – 25 basis point cut
November	21 November – ?