Repo rates drops by 1 basis point
Drop in repo rate good news for all South Africans The announcement by the South African Reserve Bank's Monetary Policy Committee earlier today that the repo rate is going down by 100 basis points from 6.25% to 5.25%, following January's 25 basis point drop from 6.5% to 6.25%, is a welcome - and necessary - step to give the economy a much-need boost, particularly in light of the ongoing effect the Covid-19 pandemic is likely to have on the country. "The full scale of the pandemic is still revealing itself in South Africa. Our country is not immune from the uncertainty that has gripped international markets in what are proving to be very uncertain times." says Carl Coetzee, CEO of BetterBond. While buyers and sellers will understandably be proceeding with caution at present, the reality is that not everyone will be able to place their lives on hold. Circumstances will invariably compel a number of people to proceed with their plans of buying or selling property, and this is where BetterBond comes in - assessing each individual case on merit and helping clients find the best deals in tough times. For first-time buyers and those who have had their sights set on an ideal property for a long time, this rate brings the dream of homeownership significantly closer. An important first step for potential buyers is to get pre-qualified, which is the process whereby the bond originator determines the size of the bond the individual qualifies for. Affordability remains key, and Coetzee encourages all potential buyers to make use of the Affordability Calculator on the BetterBond website to ascertain the size of the bond they could qualify for, and can comfortably afford. Consider the table below for an overview of the effect of the drop in the interest rate on a 20-year bond: Bond Amount Prime rate down by 1% from 9,75% to 8,75% Interest Savings over 20 years Monthly Savings R250 000,00 R38 884 R162 R500 000,00 R77 767 R324 R750 000,00 R116 651 R486 R1 000 000,00 R155 534 R648 R1 250 000,00 R194 419 R810 R1 500 000,00 R233 302 R972 R2 000 000,00 R311 070 R1 296 R3 000 000,00 R466 604 R1 945 *Based on a 20 year loan term "The lower interest rate and the fact that some banks are granting 100% home loans to candidates who meet the necessary requirements is optimistic for buyers. Furthermore, the recent announcement by Finance Minister Tito Mboweni that transfer duty does not apply to the first R1 million on property purchases is another positive for those looking to enter the property market. In conclusion Coetzee believes these measures by Treasury are all designed to ease the financial pressure on consumers and to raise confidence in their ability to maintain their monthly home loan repayments, which is very positive and much needed. epo drops by 1 % . The Reserve Bank Governer decided to drop repo rate and we expect another drop coming in the next quarter.