The MPC’s decision marked the first time since May 2023 that the committee has changed rates, which aligned with economist and analyst expectations.
The repo rate is now at 8.00%, and the prime lending rate has dropped to 11.50%. The decision to cut rates was unanimous among the MPC’s six members.
Reserve Bank governor Lesetja Kganyago said that the MPC reached a consensus of a 25 basis points, agreeing that a less restrictive stance was consistent with sustainably lower inflation over the medium term.
The latest inflation print for South Africa was 4.4% – a three-year low and below the SARB’s midpoint target of 4.5%.
The rate cut follows similar moves from other international central banks, such as the US FED, which cut interest rates by 50 basis points.
South African assets have performed relatively well recently, with the rand strengthening more than its peer countries, while long-term yields have moderated and spreads over US rates have narrowed.
Kganyago added that the SARB’s forecast sees rates moving towards neutral next year, stabilising slightly above 7%, implying that another 75-100 basis point cuts are on the horizon for South Africa.
Savings
With the latest cut, South African homeowners can expect monthly savings on their bonds.
Although a bond’s value, length, and interest rate can vary, we have looked at the savings that a 20-year bond with no deposit and a prime interest rate will receive following the latest cut.
The latest data from ooba Home Loans shows that the average house in South Africa costs R1,458,924.
With the price drop, the average bond repayment dropped from R15,810 per month to R15,558 per month – a saving of R252 per month.
For a bond of R750,000, the monthly repayment decreased by R130 to R7,998 monthly.
For a R5 million rand house, the monthly repayment dropped by R864 to R53,321.
The savings on bonds for properties prices between R750,000 and R5,million can be found below:
Value of the bond (20 years) Jul 2024 (11.75%) Sep 2024 (11.50%) Change R750 000 R8 128 R7 998 -R130
R800 000 R8 670 R8 531 -R139
R850 000 R9 212 R9 065 -R147
R900 000 R9 753 R9 598 -R155
R950 000 R10 295 R10 131 -R164
R1 000 000 R10 837 R10 664 -R173
R1 458 924 (AVG) R15 810 R15 558 -R252
R1 500 000 R16 256 R15 996 -R260
R2 000 000 R21 674 R21 329 -R345
R2 500 000 R27 093 R26 661 -R432
R3 000 000 R32 511 R31 993 -R518
R3 500 000 R37 930 R37 325 -R605
R4 000 000 R43 348 R42 657 -R691
R4 500 000 R48 767 R47 989 -R778
R5 000 000 R54 185 R53 321 -R864
