The repo rate was effectively slashed by over 40% this year, taking it back to levels last seen in 1973.
The South African Reserve Bank has effectively slashed its repo rate by just over 42% within the first five months of this year, largely in response to the Covid-19 economic turmoil.
“This represents the biggest reduction in repo rates within such a short period, just five months. There have been bigger cumulative rate cuts within a calendar year, but these cuts in total represent something of a record,” says Schüssler.“It is very rare to get interest rates this low. Rates are as low as November 1973, but also in close range to the record low of the mid-60s.
“Right now, the fear factor around Covid-19 and the economic impact will see most people conserving cash or wanting to pay off home loans. Increased demand and activity in the housing market [from the rate cuts] may only really be months away. The same is likely for the car market,” he adds. Notably, it also points out that such homeowners will now effectively be paying around R1,747 per month less on their bonds due to the cumulative 275bp repo rate cuts since the beginning of the year.
“The significant overall repo rate cuts this year will assist people with home mortgages and car loans to pay off their debt. South Africans, especially in the middle to upper income levels, are likely to focus more on saving or paying off debt,” he says.
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