Most South Africans hope that 2024 will see the economy growing holistically and with that comes the possibility of interest rates being reduced.
There may be hope on the horizon as Futuregrowth Asset Management believes that interest rates have peaked at 8.25% and will be cut by the Reserve Bank by the middle of 2024.
The asset manager told its clients that it believes that the last policy statement by the Reserve Bank monetary policy committee was hawkish.
Futuregrowth argues that we will see an interest rate change only in the middle of the year as the Reserve Bank needs time to evaluate the risks and see how the country will perform.
The risks that one should look at are load shedding, logistical or infrastructural issues, weather impacts, and how other countries' economies impact when interest rates are cut in their state.
It should be noted that the Reserve Bank expects inflation to be around 5% in the new year and will ease at around 4.5% by mid-2024.
HOME BOND PAYMENT
So what does this all mean? That is the question that most South Africans will ask themselves and how will it impact my home loan?
If you are paying off a R1 million home loan, your monthly bond repayment is currently about R10,837 a month at the current prime lending rate of 11.75 percent.
If the Reserve Bank were to decrease the lending rate by 25 basis points to 11.50 percent then your bond payment would be R10,664.
If we get a 50 basis points cut, your bond repayment would be R10,493.
A 75 basis point cut would see your bond payment drop to R10,322 and a 100 basis point cut would mean your bond payment would be R10,152.
These calculations are based on a 20-year bond repayment plan.
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