The decision late last month by the South African Reserve Bank’s (SARB’s) monetary policy committee (MPC) to cut interest rates by 25 basis points came as welcome news to those South Africans in debt.
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After a financially difficult year for many, there was some good news ahead of the festive season.
The decision by the six-man committee was unanimous and saw the repo rate drop to 7.75% while the prime lending rate now stands at 11.25%.
The news came as an early Christmas present for those homeowners with monthly bond repayment commitments – and good news for those looking to enter the property market for the first time.
However, while the news was seen as ‘good’ by those in debt, caution needs to be exercised at the same time.
“Interest rate cuts generally spur consumer confidence. A 25% rate cut may be perceived as beneficial for South African consumers. While it encourages people to spend more and even contract more loans due to the lower interest rates, at the same time, keeping interest rates too low for too long may damage the economy in the long run”, said Terence Hove, Financial Markets Strategist Consultant at Exness.
While many homeowners were hopeful of a 50 basis point cut, that could well become a reality at the next meeting on Thursday, 30 January 2025.
What does a 25 basis point cut mean in monetary terms?
As laid out in the table below, the saving after the latest announcement varies depending on the bond figure.
For a bond of R500 000, the saving is ‘only’ R84 per month – or R20 160 over the full 20-year repayment period.
However, for a bond of R5 million, that saving quickly ramps up to R858 per month – or R205 920 over the full duration.
In times like these, every cent counts!
Monthly bond repayment table
The South African website’s table below compares the now old monthly bond repayments on various bond values over a 20-year period assuming no deposit and repayments at prime, to the new cost after the interest rate cut – and the monthly saving that entails:
| Bond | Old (11.5%) | New (11.25%) | Saving |
| R500 000 | R5 330 | R5 246 | R84 |
| R750 000 | R7 998 | R7 869 | R129 |
| R800 000 | R8 531 | R8 394 | R137 |
| R850 000 | R9 065 | R8 919 | R146 |
| R900 000 | R9 598 | R9 443 | R155 |
| R950 000 | R10 131 | R9 968 | R163 |
| R1 000 000 | R10 664 | R10 493 | R171 |
| R1 458 924 | R15 558 | R15 308 | R250 |
| R1 500 000 | R15 996 | R15 739 | R257 |
| R2 000 000 | R21 329 | R20 985 | R344 |
| R2 500 000 | R26 661 | R26 231 | R430 |
| R3 000 000 | R31 993 | R31 478 | R515 |
| R3 500 000 | R37 325 | R36 724 | R601 |
| R4 000 000 | R42 657 | R41 970 | R687 |
| R4 500 000 | R47 989 | R47 217 | R772 |
| R5 000 000 | R53 321 | R52 463 | R858 |
SARB MPC MEETING DATES FOR 2025
| Meeting month | Date |
| January | 30 January |
| March | 20 March |
| May | 29 May |
| July | 31 July |
| September | 18 September |
| November | 20 November |
To rent or buy (and pay off a bond): What do YOU do?
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