A LOOK AT THE REPO RATE

PUBLISHED 17 OCT 2018   

The South African Reserve Bank’s Monetary Committee met to discuss the current interest rates late last week.  A decision was made, to accommodate the lethargic economy, that the repurchase or repo rate will remain at 6.5%. In turn, the prime overdraft rate will also maintain at 10%. This is good news for homeowners as the prime overdraft rate determines the interest rate on home loans and commercial bank lending.

The SARB Monetary Committee commented on interest rates in South Africa over the last 25 years, which have averaged at 12.58%, reaching the highest in 1998 of 23.99% and the lowest of 5% in 2012.  A lending rate of 10% provides an opportunity for investment at the moment, especially since the banks and bond originators in South Africa are still showing a willingness to lend regardless of a lackluster economy. Unchanged interest rates also mean that homeowners should be able to maintain current bond repayments.

“We welcome the news that interest rates will be maintained and not add to the already burdened consumer,” said Sandy Walsh, MD of Property.CoZa. Walsh added that the market is certainly leaning in favour of the buyer, considering the current stock of properties. “There may be slow price growth and prices will inevitably have to be lowered, leading to a healthy willingness from the banks to lend”.

Nevertheless, the current situation leaves room for sellers to make a choice to sell now instead of sitting on the fence or waiting for unrealistic offers. The market will most likely remain in over supply for the remainder of 2018 and into 2019. While the interest rate remains low, the option to sell may become more appropriate.