Second repo rate cut means massive savings on your bond
PUBLISHED 3 MAY 2020
In mid-April, as the country braced itself for a Covid-19 outbreak, the SA Reserve Bank offered home buyers a ray of hope: a total of 2% in rate cuts in just two months.
Bond costs set to fall
The repo rate is now at a historical low, having been cut by another 100 basis points to 4.25%.
This puts the bond rate at 7.75% - and that’s excellent news for anyone who is currently paying off a Cape Town home or plans to buy one in the near future. While the new rate will not offset the negative effects of loss of income during this time, it will certainly ease the pressure on the residential market and home owners with bonds or those seeking finance.
The monthly cost of a R1 million bond has fallen from R8 837 to R8 209 - that’s a saving of over R600. This amount increases to over R1 200 and R1 800 for a R2 million and R3 million bond respectively.
Low rates expected to boost demand under R3 million
South Africa will need a lot of economic support to recover from the twin shock of the coronavirus outbreak and the recent junk status downgrade.
Lower interest rates are one measure that may help the economy to recover, and it’s likely to be good news for anyone looking to sell a home in the R2 million and under category.
- Homes priced under R2 million are typically bought by young and first-time buyers who rely on bond financing to cover most of their purchase.
- The low interest rates will stimulate demand from these buyers - especially in the sectional title market which already appeals to the younger age bracket.
Buying could become as affordable as renting
With record low interest rates, some people who would usually choose to rent a home may decide to apply for a bond and become property owners.
If you’re keen to take advantage of the record low interest rates - something that may only happen once in your lifetime - we’d love to tell you more about the homes and sectional title units in our portfolio.
For more information, feel free to contact the Cape Realty team today.
Image Credit: https://pixabay.com/photos/house-money-euro-coin-coins-167734/