Kamogelo Olaitan
The South African Reserve Bank increased the repo rate by 50 basis points (bps) on Thursday, the highest increase in six years.
This was announced by the Reserve Bank Governor Lesetja Kganyago on Thursday, following the conclusion of the bank’s May Monetary Policy Committee (MPC) meeting.
This means the banks’ prime lending rate will increase from 7.75% to 8.25%.
Kganyago said the rate decision was based on the global economic outlook, which has been negatively affected by Russia’s war in Ukraine, as well as the ongoing Covid-19 crisis.
“The Reserve Bank has a responsibility to respond to the challenges the economy faces and take an appropriate stance in accordance with its mandate to protect consumers from the ravages of rising inflation.
“We have a responsibility to curb inflation because inflation is eating into the incomes of the working people in SA. We have to live true to our mandate,” said Kganyago.
What does this mean for you?
When the repo rate goes up, commercial banks put up their interest rates. Unless you have a fixed interest rate, this means that the cost of borrowing money increases and you will pay more on whatever loan repayment you may have with banks. That includes house bonds, vehicle finance, credit cards and personal loans.
If you recently obtained a R2 million bond with a 20-year payment period, you will now be paying an extra R600 per month due to the 50 point basis points increase.
On a six year R500,000 vehicle linked to a prime contract, you will be paying an extra R200 per month.
Talking to Moneyweb, Pam Golding Property Group CEO Dr Andrew Golding said while he hoped for a lower 25bps increase, the 50bps hike comes amidst “resurgent inflation” globally.
Golding said the impact on SA’s residential housing market is not expected to be significant, especially as this is still the lowest level of prime interest rates in more than two decades.
Experts advise that whether it’s a house or a car, determine your own affordability and pay more than the minimum.
