The South African Reserve Bank’s (SARB’s) monetary policy committee (MPC) met for the first time this year on Thursday, 30 January.
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And they delivered GOOD news for South Africa’s homeowners and those looking to enter the property market for the first time.
The MPC decided on a 25 basis point cut which came as welcome news to all those South Africans in debt.
The decision was in line with expectations on the back of lower inflation in South Africa in recent months.
Reserve Bank Governor Lesetja Kganyago confirmed that four MPC members voted for a 25 basis point cut, while the remained two members preferred rates to have remained unchanged.
The repo rate now stands at 7.50% while the prime lending rate is 11%.
The next MPC meeting will be on Thursday, 20 March.
What a 25 basis point cut means in monetary terms
By way of an example (see graph below), thanks to the latest interest rate cut, 20-year repayments at the new prime rate of 11% on the average house bond in South Africa of R1 458 924 will now cost R15 059 per month to finance.
That represents a monthly saving of R249 per month.
Over the course of 20 years (240 months), that equates to a total saving of R59 760 – on the (unlikely) assumption that there are no further interest rate changes during that period.
But here are the scary numbers …
To finance a R1 458 924 bond over 20 years at the new 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 160Â (give or take a few rands)
Who are the SARB?
The South African Reserve Bank’s (SARB’s) monetary policy committee (MPC) meets every second month to announce changes – if any – to the country’s repo and prime lending rates.
The meetings take place in January, March, May, July, September and November – and always on a Thursdayat 15:00.
Currently, the committee comprises of six people, with Lesetja Kganyago holding the position of governor of the SARB.
| Month | Date |
| January | 30 January – 25 basis point cut |
| March | 20 March |
| May | 29 May |
| July | 31 July |
| September | 18 September |
| November | 20 November |
Monthly bond repayment table
The South African website’s table below compares the new monthly bond repayments on various bond values over a 20-year period assuming no deposit and repayments at prime, to the now old cost after the 25 basis point cut – and the monthly saving that entails:
| Bond | Old (11.25%) | New (11%) | Saving |
| R750 000 | R7 869 | R7 741 | R128 |
| R800 000 | R8 394 | R8 258 | R136 |
| R850 000 | R8 919 | R8 774 | R145 |
| R900 000 | R9 443 | R9 290 | R153 |
| R950 000 | R9 968 | R9 806 | R162 |
| R1 000 000 | R10 493 | R10 322 | R171 |
| R1 458 924 | R15 308 | R15 059 | R249 |
| R1 500 000 | R15 739 | R15 483 | R256 |
| R2 000 000 | R20 985 | R20 644 | R341 |
| R2 500 000 | R26 231 | R25 805 | R426 |
| R3 000 000 | R31 478 | R30 966 | R512 |
| R3 500 000 | R36 724 | R36 127 | R597 |
| R4 000 000 | R41 970 | R41 288 | R687 |
| R4 500 000 | R47 217 | R46 448 | R769 |
| R5 000 000 | R52 463 | R51 609 | R854 |
To rent or buy (and pay off a bond): What do YOU do?
Let us know by leaving a comment below, or send a WhatsApp to 060 011 021 1
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