Economists predict that South Africans should brace themselves for another interest rate increase in May. According to an article published by BusinessTech, majority of economists interviewed are predicting an increase of 25 basis points on 25 May 2023.
What are the current market rates in South Africa?
The repo rate is currently 7.75%. The prime interest rate in South Africa is, at the time of writing this blog post, 11.25%.
Before we unpack how this affects you as a homeowner, let’s get into some definitions related to these interest rates.
Repo rate meaning
The repo rate (repurchase rate) refers to the rate at which the South African Reserve Bank (SARB) lends money to banks in South Africa.
The prime lending rate meaning
The prime rate South Africa (predominant rate) is the benchmark rate that commercial banks lend money to consumers (you) in South Africa.
Why does the repo rate increase?
The SARB increases the repo rate in an attempt to control inflation. Inflation is currently at 7.1% and The SARB aims to get inflation between 3-6%.
Who is The South African Reserve Bank (The SARB)?
The SARB is the central bank of South Africa whose aim is to protect the value of the Rand. They attempt to do this with inflation targeting.
How do interest rates affect you?
When the SARB’s Monetary Policy Committee (MPC) increases the repo rate, the prime interest rate in South Africa increases too. This has a direct impact on any loan you’ve taken out with a bank. When the repo rate increases, the interest rate on your loan will increase too.
This means that, as a homeowner, your bond repayment will increase. If you have a car loan, this monthly repayment will also increase.
If you are already struggling to make your bond repayments, don’t wait until it gets worse. Protect your home from being repossessed by the bank. You can do this by going under debt review.
How does debt review protect your home from being repossessed?
When you sign up for debt review (debt counselling), a Debt Counsellor puts together a new, affordable restructured repayment plan. This repayment plan gets taken to court and approved so that no legal action can be taken against you. With this court order, your assets are protected and cannot be repossessed.
Did you know: if you sign up for debt counselling, not only are your assets (home and car) protected, your new, reduced interest rate will be fixed too. So, should the SARB further increase the interest rate, you will not be affected if you’re under debt review.
What was the highest interest rate in South Africa?
The highest interest rate in South Africa was in 1998, with a repo rate of 23.99%.
What are the predictions for the interest rate in South Africa for 2024 and 2025?
According to Trading Economics, in 2024, the repo rate will average around 7%, and in 2025, around 6%.