The South African Reserve Bank has officially cut its interest rate, following the unanimous decision by the Monetary Policy Committee – lowering the repo rate from 6.75% to 6.5% per annum for the first time since March last year.
Met with excitement from various industries, the announcement of the repo rate cut promises to positively affect the real estate market in South Africa.
What Is The Repo Rate?
The Repo Rate is the rate at which a country’s central bank (The South African Reserve Bank) lends money to the country’s commercial banks and is set by the Reserve Bank’s Monetary Policy Committee.
How Does The Repo Rate Effect Property
Any changes in the Repo Rate will affect the prime lending rate, which is the lowest interest rate at which a commercial bank will start lending to their clients. With the 25 basis point drop in the Repo Rate, the top lending rate will decrease to 10%, from its previous 10.25%.
According to Founder of AMC Hunter INC, Karien Hunter, this rate cut will create a more favourable market for buyers.
“The rate cut has made the purchase of property slightly more affordable and has a positive impact on the bank’s lending criteria – simply put, more people will now qualify for bonds, and this will stimulate the property market.
Buyers that have been sitting on the fence will enter the market with renewed confidence and hopefully, the lowering of the repo rate will follow with more rates cuts in the near future.”
How Much Will You Save On A Home Loan?
As the Prime Lending Rate will now be set at 10%, current homeowners will save on their home loans. For every R100 000 borrowed, a monthly saving of roughly R16 will apply, on a loan of R1m; the saving translates to R166/month which could equate to nearly R40 000 over 20 years.
The diminished rate also means that those individuals applying for their first home loan will now find it a bit easier to qualify; with the new household income requirement for an R1m loan adjusted to R32 000/month from a previous R33 000.
For more conveyancing and property law advice please contact the dedicated team at AMC Hunter INC today.