The SA Reserve Bank has today cut the repo rate by 50 basis points to 3,75%, which is the lowest level in almost 50 years and brings the total drop in the interest rates since January this year to 2,75%.
This follows the Bank's predictions that South Africa's GDP will decline by 7,1% this year due to the lockdown implemented to try to curb the spread and effects of the Covid-19 pandemic.
In the wake of today's decision, the prime rate - and the "base rate" for home loans - will drop to 7,25%.
For investors and home-owners with existing mortgage loans, this will mean a reduction of around R30,60 per R100 000 outstanding on their bond repayments from 1 June - or R306 per month on a 20-year loan of R1m.
This means that from 1 June, the minimum monthly instalment on a R1m bond will be a total of around R1747 lower than it was in January. This should assist many owners to keep up their repayments and hold into their properties, especially since the banks are also offering a wide range of relief measures including payment holidays and restructured loans.
The rate cuts will also mean lower repayments on all other forms of credit, including car finance, personal loans and credit-card balances, which will bring further relief to many households currently in financial distress due to the Covid-19 lockdown.
Rates at these historically low levels are also expected to stimulate new home-buying activity of the next few months, since they will make it much easier for prospective buyers to qualify for a home loan, and ensure that their monthly bond repayments are much more affordable going forward.
