The Monetary Policy Committee cut the Repo rate by 25 basis points today in a bid to resuscitate a slowing economy. Growth, which was expected to reach 1% this year, has been revised downwards to 0.5%. This pegs the Repo rate at 6.75% and the base home loan rate at 10.25%.
Homeowners can breathe a little easier following the 200 basis point increase since 2014 – though the rate had remained unchanged since March last year.
“The impact of the 0.25% cut in rates for every R1m on a 20 year mortgage at the new prime rate of 10.25%, will be a monthly decrease in repayments of R160 (R1,920/year). If you add to this the further reductions this year in transfer duty thresholds, first-time buyers have a further opportunity to get into the market.” – Herschel Jawitz, CEO of Jawitz Properties
“The market is slower with fewer sales, properties are spending longer on the market, stock levels are rising and price growth is slower and stalling in most areas outside of the Cape. On the upside, the banks are still keen to lend and today’s rate decision is good news in that regard. The banks are taking a more conservative approach to approvals and deposit requirements are on the rise.” – Samuel Seeff, Chairman of the Seeff Property Group
“Top performing sectors at present include the lower priced band under R1m and the smaller two-bedroom sectional title market – both of which reflect the consistently strong demand from first-time buyers. Over and above this, steady activity continues in the middle and luxury segments of the market.” – Andrew Golding, CE, Pam Golding Property group
“During the second quarter of the year, the average price of freehold property declined from R1,161,481 to R1,139,604. The muted inflation of freehold homes can be largely attributed to the slower South African economy and rising unemployment rate. The unemployment rate in South Africa is currently at 27.7%, the highest it has been since 2008. The struggling economy and significant unemployment rate poses a threat to household income growth and erodes affordability. In turn, demand for property is constrained which negatively affected property prices.” – Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa