BREAKING: Interest rate cut means GOOD news for South Africans in debt
The South African Reserve Bank’s (SARB’s) monetary policy committee (MPC) met for the final time this year on Thursday, 21 November.
And after a financially difficult year for many, there was GOOD news for those South Africans in debt.
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The committee cut the interest rate by 25 basis points.
That saw the repo rate drop to 7.75% while the prime lending rate now stands at 11.25%.
Governor of the SARB Lesetja Kganyago confirmed that the decision was unanimous.
The news came as an early Christmas present for those homeowners with bond repayment commitments – and good news for those looking to enter the property market for the first time.
What does a 25 basis point cut mean in monetary terms?
By way of an example (see graph below), following the interest rate cut, 20-year repayments at prime (11.25%) on the average house bond in South Africa of R1 458 924 will now cost R15 308 per month to finance.
That represents a monthly saving of R250.
Over the course of 20 years (240 months), that equates to a total saving of R60 000 – on the (unlikely) assumption that there are no further interest rate changes during that period.
But here are the scary numbers …
To finance a R1 458 924 bond over 20 years at the new prime lending rate (11.25%) will NOT cost R1 458 924.
In fact, it will cost a staggering R3 673 883.
Do the sums yourself:
R15 308 x 240 months = R3 673 920 (give or take a few rands)
Monthly bond repayment table
The South African website’s table below compares 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 this month’s expected 50 basis point cut – and the monthly saving that would entail:
| Bond | Old (11.5%) | New (11.25%) | Saving |
| 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 2024
The MPC meets every second month.
| 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 – 25 basis point cut |
To rent or buy (and pay off a bond): What do YOU do?
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