By Angelique Ruzicka, editor, Justmoney
The repurchase rate will remain the unchanged at 5.75% per annum, Gill Marcus governor of the South African Reserve Bank (SARB) announced today. This means that the prime interest rate will remain unchanged at its current level of 9.25%. The news comes after SARB increased the rate by 75 basis points this year so far.
“The MPC (Monetary Policy Committee) is still of the view that interest rates will have to normalise over time. However, given the slightly improved inflation outlook notwithstanding the upside risks, the stable inflation expectations and the downside risks to the weak growth outlook, the MPC has decided that the repurchase rate will remain unchanged at 5,75 per cent per annum,” said Marcus.
According to a report by CNBC, Marcus has also announced she will be stepping down as governor of the SARB in November this year. “This is my last MPC. I have advised the president some time ago that I would not be available for renewal,” said Marcus.
Welcome rate news
CEO of RE/MAX of Southern Africa, Adrian Goslett said this was welcome news for consumers. “Although consumers have had to deal with petrol and food price increases during the first three quarters of this year, food price inflation is gradually easing and is expected to continue to fall. The same can be expected of the petrol price, which will bring about some relief for cash-strapped households,” says Goslett. “With the Reserve Bank’s CPI inflation target between 3% and 6% year-on-year in the six to 24 month future period, the lower inflation ends this year, the less pressure on the bank to increase rates next year.”
The CPI inflation had climbed from 5.3% year-on-year in November 2013 to 6.6% by June this year. The climb prompted the monetary policy committee to push rates up by 75 basis points during this period. Economists predict that although the CPI inflation has already seen a decline, it is expected to fall further and re-enter the inflation target set by the Reserve Bank. This will significantly reduce the need for any further rate hikes this year, especially considering the current weakness in economic growth.
What should home owners do now?
Goslett urged home owners to use this relatively steady and low interest rate environment to put more money down on their bond to ensure they pay their loan off in a shorter period of time. “Reducing the loan period is just as important as the interest rate for homeowners to take into consideration. Aside from reducing the term of the loan, it will also decrease the total interest paid over that period,” Goslett said.