Drop in repo rate great news for buyers

Drop in repo rate great news for buyers

16 Jan 2020

The announcement by the South African Reserve Bank's Monetary Policy Committee today that the repo rate will go down by 25 basis points from 6.5% to 6.25%, and the prime lending rate and home loan "base rate" to 9,75%, is great news for the economy in general and for the property market in particular.

In contrast to the consensus among economists, Reserve Bank Governor Lesetja Kganyago opted to lower the repo rate. "We welcome a drop in the repo rate as we believe it to be exactly what our stagnant economy needs in order to stimulate growth," says Carl Coetzee, CEO of BetterBond.

"In the buyer's market that we're currently experiencing, a lower interest rate makes property more affordable and thus more accessible to more buyers, particularly those looking to enter the market for the first time," Coetzee explains.

By way of example, Coetzee states, on a bond of R980 000 with a 10% interest rate, the monthly repayments are around R9,457. "With the repo rate going down, this reduces the minimum monthly repayment amount to R9,295, which eases the financial burden on the bond holder with a saving of R162 per month. (See below for more)

Rate Drop by 0,25% (9.75% Prime)
Bond AmountInterest Savings over 20 yearsMonthly Savings
R 250 000 R9 903R42
R 500 000R19 806R82
R 750 000 R29 709R124
R 1 000 000 R39 612 R165
R 1 250 000 R49 514R207
R 1 500 000R59 417R247
R 2 000 000 R79 223R330
R 3 000 000R118 835R495
*Based on a 20 year loan term

"In light of this good news, we want to encourage buyers to take advantage of the situation by investing in property, Coetzee encourages. BetterBond's approval rate is currently 77% overall and 90% for clients who prequalify first, which is encouraging. With interest rates coming down, buyers can be confident about their ability to maintain their home loan repayments without feeling the effects of added financial pressure.

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