The Reserve Bank's decision today to cut interest rates by a further 0,25% is particularly welcome in the light of the new tariffs that, barring some last-minute change, the US is about to impose on all South African imports.*
These tariffs are intended to make it more expensive for US consumers to buy SA products and will no doubt cause demand to drop. This could result in business closures and even job losses in certain sectors, and it has been estimated that it could cut as much as 0,6% off our already very low rate of GDP growth this year.
As it is, the SARB has revised its growth forecast for the year to just 0,9% from the previous 1,1%. and the consumer and business confidence needed to attract new investment remain fragile. However, today's rate cut, which is the fifth since September 2024, will once again reduce consumers' repayments on all their debts, including home loans, car finance, credit card balances and personal loans, and free up more money for them to spend on other things.
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This local spending will hopefully give the economy a boost and help to offset the effect of the US tariffs while SA producers pivot and seek alternative markets for their goods and services -which we are confident will happen. SA is fortuately still Africa's biggest trading partner with Europe, the UK and China and is also developing many new trade opportunities through its membership of BRICS and as a signatory to the African Continent Free Trade Agreement.
Meanwhile, we would urge all who are currently planning to buy property to make the most of the current low interest rates on home loans. Following today's cut, the base rate is now 10,5%, but those with good credit records and deposits can often negotiate an even lower rate, especially if they apply through a great mortgage originator like BetterBond.
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But at 10,5%, the monthly repayments on existing bonds will be reduced by about R170 per R1m borrowed. And for new buyers, the amount you need to earn to qualify for a R1m bond will drop from around R33 900 a month to R33 300 a month.
And when we look at the cumulative effects of the rate cuts since September, the minimum monthly repayment on a R1m bond has shrunk by R854, and the monthly salary required to qualify for a R1m bond has fallen by more than R2800 - which could make all the difference between becoming a homeowner or missing out.