This week has spelled a double positive for consumers’ financial well-being with the 25 basis point reduction in the repo rate and the published figures for CPI for August slowing to 4.4%, according to short-term lender Wonga.
Yesterday, South African Reserve Bank (SARB) Governor Lesetja Kganyago announced a cut in the repurchase rate (repo rate) for the country. He said the central bank was cutting the repo rate by 25 basis points, meaning rates would come down by 0.25%.
James Williams, head of marketing at Wonga, said this meant that servicing debt repayments would become cheaper.
“This is particularly true for those with high value loans such as home loans and vehicle asset finance. As an example, those who have bonds of R1 million can expect to see a reduction of around R200 on their monthly bond repayment. While this is great news, and with another potential repo rate cut on the horizon this side of the year, consumers still need to remain guarded around their finances and ensure they have a well-planned budget,” Williams said.
Toni Anderson, head of Standard Bank Home Services, said a bond worth R1m would see a saving of R208 per month, or R2 500 per year, following this 25 basis point rate cut.
“Standard Bank expects three additional rate cuts of 25 basis points each – one in November and two in the first half of 2025, which could mean even bigger long-term savings. If these expected cuts reduce rates by a total of 100 basis points, homeowners could save R833 per month on a R1m property in the next year,” Anderson said.
Online platform for agents, buyers, sellers, and renters Under One Roof said the SARB’s decision to lower the interest rate was a welcome relief for the property market, stimulating increased buyer activity and bringing much-needed affordability to first-time buyers and investors.
Lynne Krawchuk, CEO at the company, said the decision would have a positive impact across the board.
“With lower borrowing costs, first-time buyers and investors are more likely to enter the market and expand their property portfolios. Affordable housing areas and regions with high rental yields will likely see a surge in demand,” Krawchuk said.
She said now may be the time for hesitant buyers to act. “Competition will likely increase as buyers on the fence rush to take advantage of more favourable lending conditions. For those already looking to buy, now may be the best time to secure a property before prices rise again.”
However, Samuel Seeff, chairperson of the Seeff Property Group, said that while the rate cut was welcomed, it was disappointing that the bank had missed the opportunity for a more robust cut to stimulate the economy.
“There was more than adequate reasons for the bank to provide a 50 basis point cut, and it is concerning that the bank appears to be taking a hawkish stance, particularly since the US Fed opted for a bold rate cut of 50 basis points. Inflation is down to within the bank’s target range, the currency outlook has improved, as have the economic indicators,” Seeff said.
He said it was simply unacceptable given that the economy and property market needs much more.
“We simply cannot continue to sustain keeping the interest rate so high for so long. It is counter-productive to growth at a time when the economy desperately needs a kick-start.”
Siphamandla Mkhwanazi, FNB’s senior economist, said the 25 basis point cut on its own was unlikely to have a material impact on the property market.
“Instead, we expect that the combination of improved economic activity, a more benign inflation environment, and a now looser monetary policy will not only improve affordability for potential homebuyers, but also stimulate demand and support house price growth,” Mkhwanazi said.
He said lower borrowing costs, combined with the two-pot pension innovation, should support demand particularly in the interest-rate sensitive segments such as the affordable market and first-time buyer market.
Meanwhile, the overall improvement in sentiment on the back of improved policy outlook (Government of National Unity) should support participation by affluent households and foreigners, Mkhwanazi added.
Sarah Nicholson, operations manager at personal finance company JustMoney, said the interest rate cut was a reminder that property markets are cyclical.
“Homeowners should focus on maintaining a sound financial plan, which includes budgeting for future rate fluctuations. The lower rate may provide some short-term relief, but unexpected expenses or future rate hikes could still impact your ability to meet monthly payments. Always be prepared for changes. Consider maintaining your monthly payments at their current levels, or even making additional payments, while rates are slightly lower,” Nicholson said.
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