The latest interest rate cut of 25 basis points, announced recently, was a windfall for South African property investors who know how to capitalise on the rewards this decision offers.
What does a ‘repo rate cut’ mean?
When the repo rate comes down it is normally followed by an adjustment to the prime lending rate and so the interest that you owe on your debt to the banks also comes down:
- The repo rate is the rate at which the South African Reserve Bank lends money to commercial banks.
- The prime lending rate is the rate at which banks lend money to consumers, after they have added their own mark-up to the repo rate.
Let’s look at an example
Let’s assume you borrow a million rand for a property:
- Before the rate cut, you would have paid R9 816 per month to the banks to pay off this debt over 20 years at 10.25%.
- After the rate cut to 10% this amount drops to R9 650
This saves you R166 per month on bond repayments, which adds up to nearly R2000 a year.
And this is not just an advantage for people already in the property
investment arena, but also opens the door for first-time investors who are
considering an investment in property. The repo rate cut will mean their monthly
repayments will be lower than anticipated, which in turn decreases the full
amount that will be repaid over the entire lending term.
Whether you opt to enjoy the reduced monthly payments or to reinvest the extra money into your loan repayments, the time is right to invest in property.
IGrow Wealth Homeloans is part of the IGrow Group of Companies and our team of home loan experts work tirelessly to ensure our investors get the best possible rate from the banks. Contact IGrow Wealth Investments today to start or grow your property investment portfolio.
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