Repo Rate Cut: How much you will save on your bond repayment
The South African Reserve Bank (SARB) recently announced a drop in the interest rate. This is how much you will save.
Millions of South Africans rely on credit to be able to finance their homes.
Purchasing your property on credit means you have to repay the bank, and this comes with interest. Depending on the deal you got from your bank, you can sometimes end up paying double the purchase price due to the interest that you pay.
However, when the repo rate decreases as it has recently, this gives home purchasers an added advantage.
What is the repo rate?
The repo rate refers to the rate at which the South African Reserve Bank lends money to private banks.
How does the repo rate change affect banks?
When the repo rate increases, then the rate of interest that commercial banks will charge their clients when issuing a loan (prime lending rate) also increases.
READ: When to sell your property
Benefits of reduced repo rate on existing consumers
A decrease in the repo rate means property owners will have reduced monthly payments, which can save them thousands of Rands in the long run.
It also means they can pay extra into their bond which can help them pay off their bonds quicker.
Benefits of reduced repo rate on potential consumers
Potential homeowners benefit from low repo rates. They get to enjoy increased purchasing power. It also assists in them having a better chance to qualify for a home loan.
On 21 November, the SARB announced that the prime lending rate decreased by 25 basis points to 11.25%.
Here is a breakdown from GetGo Home Loans, one of SA's leading home finance companies, showing an estimation of how much you will save monthly.
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