Interest rates cut: How much you'll SAVE on a R1 million bond

The South African

4 days ago

The South African Reserve Bank's (SARB) Monetary Policy Committee (MPC) voted to reduce the repo rate by 25 basis points, with effect from Friday, 30 May.
This reduces the prime lending rate from banks to 10.75%.
Five members favoured this action, while one preferred a cut of 50 basis points.
'Looking forward, we have revised down our inflation forecasts. This reflects the lower starting point, as well as a stronger exchange rate assumption and lower world oil prices.
'These factors offset pressure on fuel costs from the higher fuel levy announced in the Budget. In addition, our previous forecast included VAT increases, which have since been cancelled,' SARB Governor Lesetja Kganyago said on Thursday, while delivering the Monetary Policy Committee statement.
The inflation was below 3% again in April. The undershoot of the target mainly reflects falling fuel costs, but underlying inflation is also well contained. Core inflation came in at 3%, at the bottom of SARB target range.
'Now that inflation has slowed, we have a chance to lock in lower inflation at low cost. This scenario illustrates that opportunity,' Kganyago said.
While the inflation outlook appears benign, the MPC considered an adverse scenario, which illustrates the upside risks.
'This was based on a global slowdown, triggered by escalating trade tensions, where the rand depreciates sharply. The scenario showed how a country with some fundamental vulnerabilities, like South Africa, risks stagflation, with growth moving lower while inflation rises due to currency weakness. In these conditions, monetary policy tightens to stabilise the macroeconomy.
'The threat of rand depreciation that we warned of at our last meeting, given both global and domestic factors, manifested last month, with the currency briefly touching a multi-year low against the US dollar. However, the exchange rate has since recovered, and conditions seem more settled than they did in March, even if the global environment remains uncertain,' he said.
The Gross Domestic Product (GDP) projections were trimmed and the growth was currently expected at 1.2% this year, rising to 1.8% by 2027.
'The global environment remains difficult, which makes domestic reform critical for achieving healthy growth. The SARB's main contribution is to deliver price stability, and we see scope to lock in low inflation and clear the way for sustainably lower interest rates.
'Additional measures that would improve economic conditions include reaching a prudent public debt level, further repairing and strengthening network industries, lowering administered price inflation, and keeping real wage growth in line with productivity gains,' Kganyago said.
The South African Reserve Bank's monetary policy committee meets every second month to announce changes – if any – to the country's repo and prime lending rates.
The meetings in 2025 are scheduled to take place in January, March, May, July, September and November – and always on a Thursday at 15:00.
Currently, the committee comprises of six people, with Lesetja Kganyago holding the position of governor of the SARB – and the deciding vote if necessary. Month Date Outcome January 30 January 25 basis point cut March 20 March No change May 29 May 25 basis point cut July 31 July September 18 September November 20 November
The table below shows the monthly bond repayments on various bond values over a 20-year period assuming no deposit and repayments at prime.
In addition, it shows the now 'old' 11% repayments as well as the repayments following the announcement of a 25 basis point cut as well as the monthly saving: Bond Old (11%) New (10.75%) Saving R750 000 R7 741 R7 614 R127 R800 000 R8 258 R8 122 R136 R850 000 R8 774 R8 629 R145 R900 000 R9 290 R9 137 R153 R950 000 R9 806 R9 645 R161 R1 000 000 R10 322 R10 152 R170 R1 500 000 R15 483 R15 228 R255 R2 000 000 R20 644 R20 305 R339 R2 500 000 R25 805 R25 381 R424 R3 000 000 R30 966 R30 457 R509 R3 500 000 R36 127 R35 533 R594 R4 000 000 R41 288 R40 609 R679 R4 500 000 R46 448 R45 685 R763 R5 000 000 R51 609 R50 761 R848
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