Today, the Monetary Policy Committee of the South African Reserve Bank (SARB) decided to increase the repo rate, the rate at which the SARB lends to banks, from 5.5% to 6.25%, an increase of 75 basis points. This translates into an increase in the banks’ prime lending rate from 9% to 9.75%.
The interest rate increase was expected, as inflation remains high: StatsSA announced this week that annual consumer price inflation was 7.6% in August, slightly down from 7.8% in July.
Homeowners will have to adjust to higher home loan repayments, says Adrian Goslett, regional director and CEO of Re/Max of Southern Africa. He says the impact of these interest rate hikes might only be felt next year, especially if they continue to climb.
Carl Coetzee, CEO of BetterBond, says the decision to hike the repo rate by 75 basis points – the second hike of this size since November last year – will mean consumers will need to tighten their belts even further as the cost of living increases. But Coetzee says the broader context is worth bearing in mind: “SA monetary policy is in line with major economies globally that have all been hiking – the European Central Bank (0.75% on 8 Sept), US Fed (0.75% yesterday) and Bank of England (0.5% today). So, South Africa is not alone. And we know we must keep inflation in hand, so it is worth having one eye on the bigger picture.
“Interest rates must fluctuate in response to inflationary pressures – they can’t remain at record-low levels indefinitely. However, the value of owning a property that appreciates over time remains unchanged,” Coetzee says.