New Buying Power for Homebuyers: What the Latest Interest Rate Cut Means for You!

The South African Reserve Bank (SARB) recently announced a 25 basis point cut in the policy rate, bringing it down to 8% per annum, which results in a new prime lending rate of 11.50%. This decision is the first rate change since May 2023 and is aimed at easing monetary policy to support the economy as inflation falls below the SARB’s 4.5% target.

Experts believe that this rate cut signals the beginning of a potential rate-cutting cycle that could extend into 2025. As inflation remains controlled and the Rand strengthens, further rate cuts could make property even more affordable. With this backdrop, the real estate market is poised for a possible recovery, with first-time buyers and investors alike expected to benefit from improved affordability and increased borrowing power​

This is a pivotal moment for homebuyers to evaluate their options. Lower rates mean a more favorable borrowing environment, so whether you're looking to buy your first home or invest in property, this rate cut could be the right opportunity to make a move in the market.

 

Before the recent rate cut, buyers looking at a R1 million home faced a prime lending rate of 11.75%, resulting in higher monthly repayments. With the new rate of 11.50%, their buying power has increased slightly, making home loans more affordable.

Previous Scenario (11.75% Interest Rate):

  • Loan Amount: R1 million
  • Monthly Repayment: R10,837

Current Scenario (11.50% Interest Rate):

  • Loan Amount: R1 million
  • Monthly Repayment: R10,664

This results in a monthly saving of R173, which can add up to R2,076 annually. But more importantly, it changes the amount buyers can afford while maintaining the same monthly budget.

How Much More Can Buyers Afford?

With the lower interest rate, buyers can now afford a higher loan amount while keeping their monthly repayments at around R10,837:

  • Previously: A budget of R10,837 per month would only afford a loan of R1 million.
  • Now: With the same budget, buyers can afford approximately R1,016,000.

This additional R16,000 in purchasing power might seem modest but can make a difference when choosing a property, potentially allowing for better location options or additional features.

Implications for the Property Market

The recent rate cut is part of a larger trend indicating a more favorable borrowing environment, potentially leading to further cuts in the future. As consumer confidence rises and inflation remains under control, buyers may find it increasingly attractive to enter the property market or upgrade their current living arrangements​