Your bond repayment could go down twice this year with interest rate cuts

Published Jun 25, 2024


Standard Bank said that it believes the South African Reserve Bank (Sarb) will cut the interest rate two times before the end of the year.

The bank argued that these cuts are the outcome of last month’s successful election and will provide a much-needed financial boost to the economy.

Standard Bank predicts that the first repo rate cut could be by September.

Standard Bank’s CFO, Arno Daehnke said that South Africans could expect a 50 basis points (bps) cut by the the end of 2024.

“We expect a continued commitment to the fiscal consolidation plan and ongoing traction to the growth-supportive reforms under way. This should support moderating inflation and monetary policy easing. We expect 100 basis points (bps) of cumulative interest rate cuts,” Daehnke said.

“But we expect them to be spread, with two cuts of 25bps in the second half of 2024, starting in September, and two cuts of 25bps in the first half of 2025. We had previously expected 75bps in the second half of 2024 and 25bps in the first half of 2025,” he explained.

Nedbank also predicted this line of interest rate cutting.

Last month, the bank said that it expected the Sarb to cut interest rates by at least 50bps this year.

Property experts weigh in

Stephen Whitcombe, the managing director of Firzt Realty said last week that interest rates may start to go down earlier than expected.

Whitcombe argued that lower interest rates would undoubtedly boost the property market.

These lower interest rates would make home ownership more affordable and easier for prospective buyers to qualify for a home loan, he explained.

How will lower interest rates impact your bond repayment?

If you are paying off a R1 million home loan, your monthly bond repayment is currently about R10,837 a month at the current prime lending rate of 11.75%.

If the Reserve Bank were to decrease the lending rate by 25 basis points to 11.50%, then your bond payment would be R10,664.

If we get a 50 basis points cut, your bond repayment would be R10,493.

A 75 basis point cut would see your bond payment drop to R10,322 and a 100 basis point cut would mean your bond payment would be R10,152.

These calculations are based on a 20-year bond repayment plan.

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