SA Interest Rates Drop!

Interest Rate Reduction

South Africa recently celebrated its first-interest rate reduction in four years, offering some relief to its citizens. The COVID-19 pandemic had a significant economic impact on the country in 2020, like its global effects. The country faced problems such as higher prices for everyday items, more expensive finance repayments, and rising fuel costs. Although recovery was anticipated in 2022, the war between Russia and Ukraine made global inflation worse, causing more interest rate hikes.

By 2024, the interest rate had increased to 8.25%, pushing the prime lending rate to 11.75%. This made home loans more expensive, which made it harder for people to afford property. The recent reduction in interest rates brought the prime lending rate down to 11.50%, providing some relief to borrowers.

This rate cut is particularly beneficial as it lowers borrowing costs, making it easier for prospective first time buyers to obtain home loans and or current homeowners to leverage equity through a further advance, alternatively just enjoy a slight reduction in monthly bond payments.

Companies specializing in bond origination, such as EasyBonds, Better Bond, and Ooba, are expected to see an increase in applications and approval rates, signaling a positive trend in the property market. However, CEO of EasyBonds noted that the impact of the interest rate drop might take some time to flow through in the property sector given overall cost of living pressures that have been mounting over the past 36 months, both domestic and foreign inflationary related aspects are leaving many consumers on tight budgets, thus the rate cut will not prove substantial enough to provide immediate relief that’s much needed.

Despite these challenges, Easy Bonds encourages South Africans, especially first-time home buyers, to approach bond origination firms to understand what they qualify for upfront. This initial engagement can help them make informed decisions about their potential in the property market, with firms like Easy Bonds providing comprehensive support throughout the process.