The South African Reserve Bank’s (SARB’s) monetary policy committee (MPC) will meet for the sixth and final time this year on Thursday, 21 November – and there’s expected to be more GOOD news for South Africans in debt.
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As reported by The South African website this week, annual consumer inflation cooled for a fourth consecutive month, easing to 3.8% in September. This represents the lowest figure since March 2021.
As a result, economists are now bullish about a 50 basis point cut next month.
That would mean lower monthly bond repayments – and good news for those looking to enter the property market for the first time.
However, as reported 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 reminder, there was welcome news when the SARB’s six-member monetary policy committee cut the interest rate by 25 basis points in September this year.
That meant that the repo rate now stands at 8% and the prime lending rate 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 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 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 =Â 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 next 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.
| 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 – ? |
To rent or pay off a bond: What do YOU do?
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