Some good news for debt holders as the Monetary Policy Committee (MPC) announced that interest rates will remain stable at 8.25% (repo rate), leaving the prime lending rate at 11.75%. This ends the consecutive hiking cycle that started in November 2021.
Pleased by this announcement, Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett says that an increase might have been in the cards, especially following the latest employment stats from the USA that were announced earlier this month and sent shockwaves to local stock markets.
“This news comes as a welcomed relief. Usually, when the USA’s employment rates increase, their inflation rates can be expected to increase, which in turn will lead to interest rate hikes. If the USA raises their rates, South Africa usually will too otherwise our rates become less attractive and investors become more likely to withdraw their funds from the country which would only put further pressure on our economy. While the USA has started to get their inflation under control, it is still uncertain whether enough has been done to convince the Fed to ease on interest rates,” Goslett explains.
Regardless of what has happened in the USA, Goslett states that many were unsure of what would happen with local interest rates because South Africa had only just hit the MPC’s inflation target range of between 3-6% a day before this announcement occurred, with StatsSA publishing the June inflation stats at 5,4% on 19 July.
“The fact that the MPC hasn’t raised interest rates at this meeting should afford debt holders more time to adjust to their higher repayment amounts. The one consolation for debt holders is that once our inflation is fully under control, we should hopefully enter into a period of greater stability. If you take a more historical view on the stats, as soon as inflation hits the MPC’s target range, interest rates become much more stable. Homeowners can take some solace in this because it indicates that, barring external factors, interest rate hikes are far less likely to occur within the near future.”
