The South African Reserve Bank’s (SARB’s) monetary policy committee (MPC) will meet for the final time in 2024 on Thursday, 21 November – and there’s widely expected to be more GOOD news for those South Africans in debt.
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As reported by The South African website earlier 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 buyers looking to enter the property market for the first time.
However, as reported by The South African website, paying a reduced amount in bond repayments each month 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 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 new 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 of 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 the 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 – ? |
Rent or pay off a bond: What do YOU do?
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