Repo rate cut by only 25 basis points, but this is how much you will save

The Reserve Bank’s decision to cut the repo rate by only 25 basis points, despite the US Federal Reserve cutting US rates by 50 basis points yesterday, is still good news for consumers.

Toni Anderson, head of Standard Bank Home Services, says the Monetary Policy Committee’s (MPC) decision was widely anticipated.

“This marks the first rate cut in four years, offering a start to some much-needed relief to households that have struggled with high inflation and steep debt servicing costs over the past two years.

“As both inflation and debt costs decrease, households will begin to have more disposable income available to them.”

A bond worth R1 million will see a savings of R208 per month, or R2 500 per year. Standard Bank expects three additional rate cuts of 25 basis points each, one in November and two in the first half of 2025, which could mean even bigger long-term savings.

Anderson says if these expected cuts reduce rates by a total of 100 basis points, homeowners could save R833 per month on a R1 million property in the next year.

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See how much you will save in Rands and repayment time

These calculations show the potential savings in interest for homeowners in different property brackets if they keep their monthly repayments unchanged. It also shows how much you can then shave off your repayment term.

Outstanding bond size	100 bps interest rate reduction	Forecasted annual interest saving	Years you can cut from your home loan
R500,000	R 417	R 5 000	4 years
R1,000,000	R 833	R 10 000	4 years
R1,500,000	R 1 250	R 15 000	4 years
R2,000,000	R 1 667	R 20 000	4 years
R2,500,000	R 2 083	R 25 000	4 years

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Modest 25 basis points repo rate cut good news

Prof. Raymond Parsons, economist at the North-West University Business School, says the widely expected pivot of the MPC to now start it repo rate cutting cycle by a modest 25 basis is good news for business and consumers.

“Monetary policy is still in restrictive territory, but the South African Reserve Bank (Sarb) has now recognised that the time has come for interest rate policy to start adjusting to a largely improved inflation outlook.”

He says the timing and pace of further interest rate reductions will obviously remain data-driven but are now likely to continue if the inflation outlook continues to improve.

“Although the MPC statement emphasised external uncertainties, both global and domestic economic trends on balance strongly indicate that, barring shocks, another cut of 25 basis points should be possible at the MPC’s next meeting in November.

“As it is still early days in the implementation of the two-pot retirement system of access to pension funds and given the firm rules of engagement, the MPC is right not to be too concerned about its possible inflationary effects.

“On present evidence, the macroeconomic implications of the system over time are likely to be quite balanced.”

ALSO READ: This is how your interest rate is calculated

Small repo rate cut shows Sarb’s prudent policy stance – still room for more

Jee-A van der Linde, senior economist at Oxford Economics Africa, says the 25 basis points repo rate cut highlights the Sarb’s prudent policy stance, which is predominately due to an uncertain economic outlook, domestically and globally.

“We believe the Sarb will maintain its cautious approach and slash rates by another 25 basis points in November, followed by more 25 basis points cuts in every quarter next year.

For now, the Sarb seems uninterested in frontloading rate cuts, despite the US Federal Reserve opting to do so and is instead retaining a tight bias, which should lend further support to the Rand.”

Patrick Buthelezi, economist at Sanlam Investments, says inflation in south Africa has been surprisingly lower in recent times, with the Sarb revising its inflation forecast lower to 4.6% in 2024, 4.0% in 2025 and 4.5% in 2026. Core inflation is also projected to average below the midpoint throughout the forecast period.

“There is still ample room for the Sarb to continue cutting the repo rate in the meetings ahead as the monetary policy stance is still restrictive.

“The quarterly projection model the MPC uses as a guide suggests the repo rate will decrease to about 7.09% in 2026 compared to the previous estimate of 7.25%. This suggests we can expect the Sarb to continue to cut rates as they move towards neutral rates.”

ALSO READ: Inflation outlook improved in recent months – good news for repo rate cut

Lower inflation, more electricity and strong Rand paved the way for repo rate cut

David Rees, senior emerging markets economist at Schroders, says lower inflation, reduced political risk, the fading energy crisis and a strong Rand cleared the way for the Sarb to finally start cutting rates.

“Policymakers are likely to tread carefully, as highlighted by the Bank’s communique that accompanied the decision to cut the repo rate, but favourable local macro conditions, along with the onset of the Fed easing, mean that the repo rate is likely to fall further in the months ahead to boost economic growth in 2025.”

FNB CEO Harry Kellan welcomed the repo rate cut and says it is consistent with the global trend towards lower interest rates.

“However, we do not anticipate a major cutting cycle. Inflation expectations remain above the Sarb’s target mid-range of 4.5%, with average inflation expectations for 2024 at around 5%, although it is expected to decline next year.

“Our view is that interest rates will be further lowered in 2025, but rate cuts will be modest and depend on new inflation data. Contributing factors include a 10% strengthening of the Rand, 2-year low fuel prices and stabilised electricity supply.”

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Repo rate cut could help housing market recover

Dr Andrew Golding, chief executive of the Pam Golding Property group hopefully this is the start of the long-awaited interest rate cutting cycle and with things moving both globally and locally in a more favourable direction, it provides scope for further rate cuts and significant relief for households and therefore a more supportive environment for a recovery in the housing market during the next 12-18 months.

Frank Blackmore, lead economist at KPMG South Africa, says the governor made it clear that the Sarb intends to continue with the interest rate reduction cycle until a repo rate of around 7% is reached.

“This will be important for consumers and businesses alike, meaning that less of their income will go towards covering debts and servicing debts and more could be spent in the economy.”