Tag: repo rate

The repo rate, inflation and the Reserve Bank’s decisions all play a role in shaping our finances, from savings and loans to monthly payments. Understanding how these factors influence our financial well-being can help us make informed decisions and prepare for economic changes.

While many factors indicated the possibility of a rate hike, the South African Reserve Bank (SARB)’s decision to hold their key lending rate provides some relief after a challenging year.

Purchasing a home is one of the most significant financial decisions most people make in their lifetime. This requires careful consideration and planning, especially in today's economic climate, where interest rates are skyrocketing, and income is not set in stone.

A record amount of R1.6 trillion is currently held in South African bank accounts as retail savings deposits. This is a staggering amount of money which is currently conservatively invested. In many ways, this movement of funds reflects the significant uncertainties faced by investors, both in South Africa and globally.

Interest rates have gone up several times in the last few months in South Africa, and it looks like they will keep rising for the foreseeable future. So, this begs the question: what are interest rates, why are they rising, and how do they affect you?

As interest rates continue to rise, it is more important than ever to put down a deposit on your new home to keep your monthly bond repayments down. Inflation in South Africa rose to 5.9% in April 2022 and by the end of May, the Reserve Bank’s Monetary Policy Committee increased the repo rate by 100 base points to 4.75%.

The South African Reserve Bank increased the repo rate by 50 basis points to 4.75%, after it was previously agreed at 25bps during the May policy meeting due to the declining Rand exchange, consumers are in for a tough time. When the repo rate goes up, the lending rate goes up and the consumers' pockets are affected.

Despite economic turbulence in South Africa, the repo rate has remained two basis points lower than it was before the pandemic’s onset in March 2020. This, combined with high approval rates amongst the banks, has created favourable home loan lending conditions for buyers.

Chief Economists from in a variety of countries globally released the Global Economic Outlook paper this week which provides detailed insights into the global obstacles and opportunities. Surprisingly, while the pandemic may not be over, the major economies are shifting their mindset and focusing increasingly on the potential risks and rewards of a more sustainable long-term recovery and route to sustainable growth.

Despite perceiving the overall risks to CPI as on the upside, all five members of the Monetary Policy Committee (MPC) decided to keep the repo rate unchanged at 3.5%. The repo rate has been on this level since 23 July 2020.