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SARB hikes repo rate by 50bps, prime lending rate now 11.75%

Posted by Hugo van Schalkwyk on 30/05/2023

The South African Reserve Bank’s Monetary Policy Committee has raised the repo rate by a further 50 basis points to 8.25%, leaving the prime lending rate at 11.75% – the highest it has been since 2009.

Rate hike an economic killjoy and burden for homebuyers

The hike takes the repo rate to 8.25%, and the base home loan rate to 11.75%. Seeff says the direct effect on homeowners and buyers is that the cost of borrowing has risen drastically over the last two years.

While the deterioration of the currency is a concern, it is largely expected to return to a more manageable level while the reduction of the CPI to 6.5% now puts it only slightly above the Bank’s target range. The higher inflation is in any event not demand driven.

As a result of the latest 50bps interest rate hike, monthly bond repayments over a 20-year term will increase by approximately:

R750 000 bond – extra R259 from R7 869 to R8 128

R900 000 bond – extra R310 from R9 443 to R9 753

R1 000 000 bond – extra R344 from R10 493 to R10 837

R1 500 000 bond – extra R517 from R15 739 to R16 256

R2 000 000 bond – extra R689 from R20 985 to R21 674

R2 500 000 bond – extra R862 from R26 231 to R27 093

South Africa has weathered far higher interest rates in the past (see graph below), and when adjusting for inflation, the real prime rate is not as high as it was prior to the pandemic. Despite this, the higher interest rate will undoubtedly provide a challenge for the many first-time buyers who capitalised on the low rates during the pandemic in order to gain a foothold in the property market.

“One of the most valuable things today’s buyers have is time,” he says. “Supply greatly exceeds demand, which means there isn’t a lot of competition. You can safely take your time to look around, do your investigations, and find the right spot at the right price without fear of missing out.”

P24 30 May 2023

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