How the recent interest rate cut affects bond repayments

The South African Reserve Bank (Sarb) has announced that the interest rate would be cut by 25bp, but what impact will the cut have on bond repayments? 

According to Seeff Property Group, as a result of the 25bps rate cut, mortgage repayments will reduce by (based on a 20-year repayment period at the prime rate):

Impact of interest rate on property buying

The announcement of a further 25 basis point rate cut marks another milestone for the residential property sector, reducing the repo rate to 7.50% and the prime lending rate to 11.0%.

This is the third interest rate cut in less than six months, with more potential rate cuts expected during the first half of 2025, according to CEO of ooba Group, Rhys Dyer.

Dyer stated that the South African Reserve Bank's reduction of the interest rate, coupled with the possibility of additional relief, will bolster the momentum in South Africa’s residential property sector, indicating robust growth in home loan demand.

He added that with economic activity still at subdued levels and headline inflation at just 3.0% in December last year, there is a strong case for further interest rate relief locally. However, the global economic outlook may dictate some changes in the months to come.

"The global economic and inflation outlook is rather uncertain, and the Sarb may be reluctant to cut interest rates too hastily and run the risk of any reversal in the progress achieved thus far in containing price pressures," Dyer said. 

Looking ahead

Dyer believes that it is now a great time to enter the housing market.

"Over the next year, we anticipate double-digit growth in homebuying activity and transactions, underpinned by interest rate cuts and improved investor confidence."

"With many homebuyers looking to enter the market, our best advice is to seek out a trusted home loan comparison service to increase your chances of receiving home loan approval and at the best possible rate."

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