Welcome news, rate cut brings festive cheer, spending boost for economy and property market

Yesterday’s 25-basis point rate cut announced by the Reserve Bank brings welcome news and early festive cheer for consumers, the economy and the property market, says Samuel Seeff, chairperson of the Seeff Property Group. The cut brings the repo rate down to 6.75% (from 7.00%), and prime to 10.25% (from 10.50%).

The decision was anticipated given the favourable economic indicators. This includes inflation at a historic low of just under 3.3% on average for the year, and despite the recent uptick, still comfortably within the Bank’s proposed new lower target range of 2-4%. The currency also remains stable below R18.00 to the USD, recently strengthening to around ZAR17.20.

Further good news for the economy includes the Grey List exit, and S&P credit rating upgrade to BB  (the first in 20 years), positive job growth data for the last quarter and a slightly better growth outlook. The cut brings further vital relief to the economy, lowering the cost of debt and freeing up more disposable income to spend in the economy, especially ahead of the busy annual retail season.

The rate cut is particularly good news for the property market, says Seeff. It will further boost affordability, and demand, especially as the market continues to lag despite the four rate cuts since the third quarter of last year.

The cut will further lower the cost of home loans, and improve property affordability, a great incentive to attract more buyers to the market. This will stimulate more demand, which in turn is good news for sellers and overall sales volumes.

Seeff says further that the four rate cuts since last year has brought significant savings for home owners and prospective buyers. The savings on the monthly repayment on a R1m home loan (over 20-years) is now down by over R1,000 compared to mid-2024. This is a great incentive to buyers, especially for more first-time buyers to get into their own homes.

While the cuts have been most welcome, Seeff says the interest rate is still slightly higher compared to the pre-Pandemic level, and the property market has not yet fully recovered. “Given that inflation is at a historic low and expected to remain within the proposed new inflation target rate, we would urge the Bank to consider a further rate cut in January,” he concluded.

As a result of the 25bps rate cut, mortgage repayments will reduce by:

R750 000 bond – from R7,488 to R7,362 – thus saving R126

R900 000 bond – from R8,985 to R8,835 – thus saving R150

R1 000 000 bond – from R9,984 to R9,816 – thus saving R168

R1 500 000 bond – from R14,976 to R14,725 – thus saving R251

R2 000 000 bond – from R19,968 to R19,633 – thus saving R335

R2 500 000 bond – from R24,960 to R24,541 – thus saving R419

R3 000 000 bond – from R29,951 to R29,449 – thus saving R502

R5 000 000 bond – from R49,919 to R49,082 – thus saving R837

(Based on a 20-year repayment period at the prime rate)

Issued by Gina Meintjes