21 November, 2024 – Tyson Properties, Chas Everitt, Firzt Realty, and Yael Geffen comment on the latest interest rate cut.
WORDS : SUPPLIED :: PHOTO: PEXELS
Tyson Properties: An opportunity for good financial planning
Tyson Properties, Chris Tyson
Tyson Properties CEO, Chris Tyson, says homeowners should celebrate the latest interest cut, but be prudent in 2025. He welcomed a second interest rate cut by 25 bps to 7.75%, but noted that homeowners still need to remain cautious going into 2025.
Although Tyson – and most of the country’s economists – expect the Reserve Bank’s Monetary Policy Committee (MPC) to continue to cut rates during the first half of next year with at least another 0.5 bps to be shaved off the prime lending rate, he believes that consumers must learn from past mistakes by decreasing their debt and either saving the difference or continuing to repay the same amount on their home loans in order to rapidly reduce what is probably their largest monthly expenditure.
“Rather than your repayments being predominantly interest with a small amount credited to the capital borrowed, homeowners can increase that balance and score by paying off their bond in a shorter timeframe. The benefit of this saving is that it cannot attract tax as it is simply a future cost reduction and not income,” he says.
Based on the fact that most have been paying 11.5% interest on their bonds before the SARB lowered the repo rate (the rate at which it lends money to the commercial banks) to 8% in September and now 7.75% in December, this latest reduction takes a further R171 off home loans worth R1 million and R344 off R2 million bonds. Although these are small amounts, they will ultimately add up to more meaningful figures next year.
“We have been given a good indication by the South African Reserve Bank that the interest rates we have seen over the past two years are the ceiling. Always budget around the maximum interest rate and not the current interest rate. That way, if it comes down, and you do not decide to continue paying a higher amount on your bond, you have spare money to do other things,” he advises.
Although Tyson believes that what now appears to be a downward interest rate cycle provides a much needed boost for the property market, he says it is still too soon to tell exactly what impact this will have.
“It remains a buyers’ market. 2024 has been a tough market for most areas and, in particular, the Gauteng and KwaZulu-Natal markets. This second interest rate cut, however, bodes well for a good 2025 for the whole country as we are coming off a very low base,” he explains.
Nevertheless, Tyson recommends caution as, although this latest interest rate cuts come off an inflation rate which is now below the Reserve Bank’s 4.5% midpoint target range, a number of uncertainties remain – including hints by the central bank that it might lower its inflation range to below 3%.
South Africa unfortunately remains vulnerable to external pressures including the resurgent dollar on the back of Trump’s re-election and rising petrol prices due to ongoing conflict in the Middle East. These, inevitably, have a knock-on effect when it comes to household expenditure.
As a result, going into 2025, Tyson advises buyers to carefully consider their choices, taking location in relation to travelling distances and even facilities that allow them to work from home into account. Homes with solar power and water collection facilities can also lower utility bills which will rise in the new year.
“Tragically, too many people buy expensive houses when rates are low and are forced to sell their properties and lose money when the rates increase. Buying a property must be a medium to long-term commitment given the costs associated with entering and leaving the market,” he concludes.
Chas Everitt: Rate cuts expected to boost summer sales surge
Berry Everitt, Chas Everitt
The spring-into-summer home sales surge that usually occurs at this time of year is bound to be given additional impetus by this week’s interest rate drop, says Berry Everitt, CEO of the Chas Everitt International property group.
The 25 basis point rate cut, which comes on the back of the inflation rate declining sharply to 2,8% in October from 3,8% in September, brings the repo rate to to 7,75% and the prime lending and base home loan rate to 11.25%.
“This will mean lower repayments on all sorts of debt, including car finance, personal loans and credit card balances as well as home loans, and combined with a lower cost of living, will create significant financial relief for most households.
“As far as existing homeowners are concerned, it will reduce the minimum monthly repayment on the average home loan of R1,25m by R215 (or a total of R431 since August) – and lower the risk of bond defaults across the board. This is important because the latest FNB Property Barometer figures show that almost a quarter of those currently selling their homes are doing so because they are in financial difficulty, while the National Credit Regulator predicts that almost 8% of borrowers will be in arrears to some degree during the first quarter of next year.”
Even more importantly, though, lower interest rates make it easier for those who want to buy a new home to afford the monthly instalments, and to achieve the minimum income thresholds required for home loan approval, he says
“And we feel sure this will bring about a bumper sales season this summer, especially in popular coastal areas such as Cape Town, the West Coast, the Whale Coast, the Garden Route, but also in Johannesburg, where there is still exceptional value to be had, and many existing owners are now eyeing upgrades before the additional rate cuts anticipated in 2025 push prices up too much.”
As it is, Everiit notes, the latest BetterBond Property Brief records an immediate 18% increase in home loan applications following the minimal 25 basis point rate cut in September, indicating that there is substantial pent-up demand in the market due to the high interest rates of the past two years.
“This is further underlined by the fact that house prices in some areas are already starting to move slowly upward. In fact, the BetterBond report shows that the average home price showed a year-on-year gain of 3,3% in October, which put it 39% ahead of the average price achieved in October 2019, just before the Covid-19 pandemic. And the average home price paid by FTBs rose even more, by 4,1% in October compared to the same month of 2023.”
The biggest impact of this rate cut and those still to come, he says, will be at the bottom end of the market, where prospective buyers are almost wholly credit- dependent and where increased lending caution on the part of banks has caused the minimum deposit requirements to rise steeply over the past year.
“Potential buyers in this sector will now be able to find more properties within their budget and become homeowners instead of continuing to rent. This will enable more existing owners to move up the property ladder and also create mor e demand for units in new developments, which have been largely absent from the market since 2022 but have begun springing up again in recent months.”
In general terms, says Everitt, rate cuts and inflation decreases usually also boost consumer and business confidence, leading to an increase in spending in many different sectors, faster economic growth and a rise in employment, which bodes well for everyone’s financial wellbeing in the year to come.
Firzt Realty: Stash rate cut savings in your bond for major benefits
Stephen Whitcombe, Firzt Realty
This week’s interest rate cut of 25 percentage points brings the repo rate to 7,75% and the prime lending rate to 11,25% – and also creates a golden opportunity for homeowners to start shortening their home loan repayment periods and saving themselves many thousands of rands on the eventual cost of their properties.
That’s the word from Stephen Whitcombe, MD of the Firzt Realty group, who notes that the latest rate drop represents a monthly repayment reduction of just R17 per R100 000 of a 20-year bond borrowed at prime, and that while this might not seem significant, it adds up to R172 a month on a R1m bond and R343 a month on a R2m bond, as Table 1 below shows.
“This comes on top of the repayment reductions brought about by the 25 percentage point interest rate cut in September and will undoubtedly make it easier for potential homebuyers to qualify for home loans and afford the monthly repayments. On a first-time-buyer home loan of R750 000 borrowed at prime, for example, the qualifying income is now around R26 200, compared to just over R27 000 in August, and the minimum monthly repayment is now R7870, compared to R8130.
“Equally important though, is the fact that these rate cuts and those predicted for next year hold out the prospect of big future benefits for existing homeowners if they decide to put all the monthly repayment savings back into their home loans now instead of spending the extra cash. All they need to do is maintain their repayments at the same level as they were in August, and the fact that inflation rate has dropped so much in the past few months (to 2,8% in October) should make it relatively easy to do this without feeling too much strain on household budgets.”
In addition, he says, anyone who gets a pay rise in January should be planning to also allocate at least some of these extra earnings to their home loan account to help bring forward the date that their bond will be paid off and save themselves many thousands of rands in the process.”
The current average salary in SA is around R26 000, and predictions are that the average increase next year will be 6%, which would translate to an increase of around R1500. Table 1 also shows what the effects would be if homeowners were to add just a third of that to their minimum monthly bond repayment, in addition to the savings from rate cuts.
“And finally, any employees who receive a bonus or ’13th cheque’ in December should consider putting at least 50% of that money into their home loan account to reduce the capital amount on which interest is charged, as this can also create a surprisingly large difference to their monthly bond repayments over time. This shown in Table 2 and can be increased by making additional one-off payments every time people receive a bonus or other additional income.”
Table 1: Potential benefits from adding to your minimum bond repayment
| Remaining bond amount at 11%
(R) |
Savings from 0,25% cut Sep |
Savings from 0,25% cut Nov |
Additional R500 from salary increase |
Total that could be added to minimum instalment |
Months cut from 20-year repayment period |
Total home loan interest savings |
| 750 000 |
129 |
129 |
500 |
758 |
59 |
328 761 |
| 1m |
173 |
172 |
500 |
845 |
52 |
387 449 |
| 1,25m |
216 |
215 |
500 |
931 |
45 |
442 312 |
| 1,5m |
259 |
258 |
500 |
1017 |
44 |
495 176 |
| 2m |
346 |
343 |
500 |
1189 |
40 |
597 322 |
Table 2: Potential bond benefits from one additional repayment per year
| Remaining bond amount at 11.25% (R) |
Example one-off additional repayment |
Months cut from 20-year repayment period |
Total home loan interest savings |
| 750 000 |
5000 |
6 |
45 912 |
| 1m |
5000 |
4 |
46 221 |
| 1,25m |
5000 |
3 |
46 410 |
| 1,5m |
5000 |
3 |
46 536 |
| 2m |
5000 |
2 |
46 675 |
Repo rate reaction: Property sector Yael Geffen
Yael Geffen, LGSIR
Lew Geffen Sotheby’s International Realty CEO, Yael Geffen, says the second consecutive 25 basis-points cut to the prime lending rate is not yet enough to make a significant difference — but is still a step in the right direction for embattled South African consumers heading into the festive season.
The new repo rate set at the Monetary Policy Committee’s (MPC) final meeting of the year this week means a cut of approximately R340 on a new bond of R2 million, at prime.
“Any cut to the repo rate right now is good news, and business understands that SA Reserve Bank Governor Lesetja Kganyago needs to act cautiously, balancing what consumers are crying out for, with what is in the longer-term interests of the country’s economy.
“We take all the good news we can get, like the fact that annual consumer price inflation for October was only 2.8%, down from 3.8% in September 2024. It’s below the Reserve Bank’s target and the lowest inflation since the height of the pandemic in June 2020, when the rate was 2.2%.
“Kudos too for grid stability as we celebrate more than 200 days without loadshedding. It’s a five-year record for Eskom, and one that we cannot ignore since grid security has been one of the main constraints in recent years to investor confidence and economic growth.”
Geffen says investors should also heed Kganyago’s extremely positive prediction in today’s MPC announcement that the Reserve Bank’s forecast sees more repo rate cuts coming in the new year, “stabilising a bit above 7%”.
“That’s substantially down from the rate of 11.25% set today, and bodes well for South Africa’s economic outlook in 2025.
“One can’t ignore the giant elephant in the room, though. One of the biggest variables to South Africa’s economic growth in the new year, is the re-election of Donald Trump as US president.
“The rand has weakened from R17.29/$ to current levels of around R18.15 since the US election earlier this month. The dollar strengthened on the back of Trump’s stated intentions of hiking import tariffs and lowering taxes, which could be challenging for South Africa’s economy because a weaker rand will fan inflation.
“It also remains to be seen what diplomatic fallout with the West will result from the International Criminal Court issuing arrest warrants today for leaders of both Israel and Hamas.”
Geffen says the good news, though, is that South Africa’s property market has already felt a slight but positive effect after September’s MPC meeting, when the country saw the first interest rate cut in years.
“As a nation we need to celebrate every victory, every milestone. It’s only with the public and private sectors working together, that we’ll see South Africa truly prosper.”
The next MPC meeting is on 30 January 2025.
21 November, 2024 – Tyson Properties, Chas Everitt, Firzt Realty, and Yael Geffen comment on the latest interest rate cut.
WORDS : SUPPLIED :: PHOTO: PEXELS
Tyson Properties: An opportunity for good financial planning
Tyson Properties, Chris Tyson
Tyson Properties CEO, Chris Tyson, says homeowners should celebrate the latest interest cut, but be prudent in 2025. He welcomed a second interest rate cut by 25 bps to 7.75%, but noted that homeowners still need to remain cautious going into 2025.
Although Tyson – and most of the country’s economists – expect the Reserve Bank’s Monetary Policy Committee (MPC) to continue to cut rates during the first half of next year with at least another 0.5 bps to be shaved off the prime lending rate, he believes that consumers must learn from past mistakes by decreasing their debt and either saving the difference or continuing to repay the same amount on their home loans in order to rapidly reduce what is probably their largest monthly expenditure.
“Rather than your repayments being predominantly interest with a small amount credited to the capital borrowed, homeowners can increase that balance and score by paying off their bond in a shorter timeframe. The benefit of this saving is that it cannot attract tax as it is simply a future cost reduction and not income,” he says.
Based on the fact that most have been paying 11.5% interest on their bonds before the SARB lowered the repo rate (the rate at which it lends money to the commercial banks) to 8% in September and now 7.75% in December, this latest reduction takes a further R171 off home loans worth R1 million and R344 off R2 million bonds. Although these are small amounts, they will ultimately add up to more meaningful figures next year.
“We have been given a good indication by the South African Reserve Bank that the interest rates we have seen over the past two years are the ceiling. Always budget around the maximum interest rate and not the current interest rate. That way, if it comes down, and you do not decide to continue paying a higher amount on your bond, you have spare money to do other things,” he advises.
Although Tyson believes that what now appears to be a downward interest rate cycle provides a much needed boost for the property market, he says it is still too soon to tell exactly what impact this will have.
“It remains a buyers’ market. 2024 has been a tough market for most areas and, in particular, the Gauteng and KwaZulu-Natal markets. This second interest rate cut, however, bodes well for a good 2025 for the whole country as we are coming off a very low base,” he explains.
Nevertheless, Tyson recommends caution as, although this latest interest rate cuts come off an inflation rate which is now below the Reserve Bank’s 4.5% midpoint target range, a number of uncertainties remain – including hints by the central bank that it might lower its inflation range to below 3%.
South Africa unfortunately remains vulnerable to external pressures including the resurgent dollar on the back of Trump’s re-election and rising petrol prices due to ongoing conflict in the Middle East. These, inevitably, have a knock-on effect when it comes to household expenditure.
As a result, going into 2025, Tyson advises buyers to carefully consider their choices, taking location in relation to travelling distances and even facilities that allow them to work from home into account. Homes with solar power and water collection facilities can also lower utility bills which will rise in the new year.
“Tragically, too many people buy expensive houses when rates are low and are forced to sell their properties and lose money when the rates increase. Buying a property must be a medium to long-term commitment given the costs associated with entering and leaving the market,” he concludes.
Chas Everitt: Rate cuts expected to boost summer sales surge
Berry Everitt, Chas Everitt
The spring-into-summer home sales surge that usually occurs at this time of year is bound to be given additional impetus by this week’s interest rate drop, says Berry Everitt, CEO of the Chas Everitt International property group.
The 25 basis point rate cut, which comes on the back of the inflation rate declining sharply to 2,8% in October from 3,8% in September, brings the repo rate to to 7,75% and the prime lending and base home loan rate to 11.25%.
“This will mean lower repayments on all sorts of debt, including car finance, personal loans and credit card balances as well as home loans, and combined with a lower cost of living, will create significant financial relief for most households.
“As far as existing homeowners are concerned, it will reduce the minimum monthly repayment on the average home loan of R1,25m by R215 (or a total of R431 since August) – and lower the risk of bond defaults across the board. This is important because the latest FNB Property Barometer figures show that almost a quarter of those currently selling their homes are doing so because they are in financial difficulty, while the National Credit Regulator predicts that almost 8% of borrowers will be in arrears to some degree during the first quarter of next year.”
Even more importantly, though, lower interest rates make it easier for those who want to buy a new home to afford the monthly instalments, and to achieve the minimum income thresholds required for home loan approval, he says
“And we feel sure this will bring about a bumper sales season this summer, especially in popular coastal areas such as Cape Town, the West Coast, the Whale Coast, the Garden Route, but also in Johannesburg, where there is still exceptional value to be had, and many existing owners are now eyeing upgrades before the additional rate cuts anticipated in 2025 push prices up too much.”
As it is, Everiit notes, the latest BetterBond Property Brief records an immediate 18% increase in home loan applications following the minimal 25 basis point rate cut in September, indicating that there is substantial pent-up demand in the market due to the high interest rates of the past two years.
“This is further underlined by the fact that house prices in some areas are already starting to move slowly upward. In fact, the BetterBond report shows that the average home price showed a year-on-year gain of 3,3% in October, which put it 39% ahead of the average price achieved in October 2019, just before the Covid-19 pandemic. And the average home price paid by FTBs rose even more, by 4,1% in October compared to the same month of 2023.”
The biggest impact of this rate cut and those still to come, he says, will be at the bottom end of the market, where prospective buyers are almost wholly credit- dependent and where increased lending caution on the part of banks has caused the minimum deposit requirements to rise steeply over the past year.
“Potential buyers in this sector will now be able to find more properties within their budget and become homeowners instead of continuing to rent. This will enable more existing owners to move up the property ladder and also create mor e demand for units in new developments, which have been largely absent from the market since 2022 but have begun springing up again in recent months.”
In general terms, says Everitt, rate cuts and inflation decreases usually also boost consumer and business confidence, leading to an increase in spending in many different sectors, faster economic growth and a rise in employment, which bodes well for everyone’s financial wellbeing in the year to come.
Firzt Realty: Stash rate cut savings in your bond for major benefits
Stephen Whitcombe, Firzt Realty
This week’s interest rate cut of 25 percentage points brings the repo rate to 7,75% and the prime lending rate to 11,25% – and also creates a golden opportunity for homeowners to start shortening their home loan repayment periods and saving themselves many thousands of rands on the eventual cost of their properties.
That’s the word from Stephen Whitcombe, MD of the Firzt Realty group, who notes that the latest rate drop represents a monthly repayment reduction of just R17 per R100 000 of a 20-year bond borrowed at prime, and that while this might not seem significant, it adds up to R172 a month on a R1m bond and R343 a month on a R2m bond, as Table 1 below shows.
“This comes on top of the repayment reductions brought about by the 25 percentage point interest rate cut in September and will undoubtedly make it easier for potential homebuyers to qualify for home loans and afford the monthly repayments. On a first-time-buyer home loan of R750 000 borrowed at prime, for example, the qualifying income is now around R26 200, compared to just over R27 000 in August, and the minimum monthly repayment is now R7870, compared to R8130.
“Equally important though, is the fact that these rate cuts and those predicted for next year hold out the prospect of big future benefits for existing homeowners if they decide to put all the monthly repayment savings back into their home loans now instead of spending the extra cash. All they need to do is maintain their repayments at the same level as they were in August, and the fact that inflation rate has dropped so much in the past few months (to 2,8% in October) should make it relatively easy to do this without feeling too much strain on household budgets.”
In addition, he says, anyone who gets a pay rise in January should be planning to also allocate at least some of these extra earnings to their home loan account to help bring forward the date that their bond will be paid off and save themselves many thousands of rands in the process.”
The current average salary in SA is around R26 000, and predictions are that the average increase next year will be 6%, which would translate to an increase of around R1500. Table 1 also shows what the effects would be if homeowners were to add just a third of that to their minimum monthly bond repayment, in addition to the savings from rate cuts.
“And finally, any employees who receive a bonus or ’13th cheque’ in December should consider putting at least 50% of that money into their home loan account to reduce the capital amount on which interest is charged, as this can also create a surprisingly large difference to their monthly bond repayments over time. This shown in Table 2 and can be increased by making additional one-off payments every time people receive a bonus or other additional income.”
Table 1: Potential benefits from adding to your minimum bond repayment
(R)
Table 2: Potential bond benefits from one additional repayment per year
Repo rate reaction: Property sector Yael Geffen
Yael Geffen, LGSIR
Lew Geffen Sotheby’s International Realty CEO, Yael Geffen, says the second consecutive 25 basis-points cut to the prime lending rate is not yet enough to make a significant difference — but is still a step in the right direction for embattled South African consumers heading into the festive season.
The new repo rate set at the Monetary Policy Committee’s (MPC) final meeting of the year this week means a cut of approximately R340 on a new bond of R2 million, at prime.
“Any cut to the repo rate right now is good news, and business understands that SA Reserve Bank Governor Lesetja Kganyago needs to act cautiously, balancing what consumers are crying out for, with what is in the longer-term interests of the country’s economy.
“We take all the good news we can get, like the fact that annual consumer price inflation for October was only 2.8%, down from 3.8% in September 2024. It’s below the Reserve Bank’s target and the lowest inflation since the height of the pandemic in June 2020, when the rate was 2.2%.
“Kudos too for grid stability as we celebrate more than 200 days without loadshedding. It’s a five-year record for Eskom, and one that we cannot ignore since grid security has been one of the main constraints in recent years to investor confidence and economic growth.”
Geffen says investors should also heed Kganyago’s extremely positive prediction in today’s MPC announcement that the Reserve Bank’s forecast sees more repo rate cuts coming in the new year, “stabilising a bit above 7%”.
“That’s substantially down from the rate of 11.25% set today, and bodes well for South Africa’s economic outlook in 2025.
“One can’t ignore the giant elephant in the room, though. One of the biggest variables to South Africa’s economic growth in the new year, is the re-election of Donald Trump as US president.
“The rand has weakened from R17.29/$ to current levels of around R18.15 since the US election earlier this month. The dollar strengthened on the back of Trump’s stated intentions of hiking import tariffs and lowering taxes, which could be challenging for South Africa’s economy because a weaker rand will fan inflation.
“It also remains to be seen what diplomatic fallout with the West will result from the International Criminal Court issuing arrest warrants today for leaders of both Israel and Hamas.”
Geffen says the good news, though, is that South Africa’s property market has already felt a slight but positive effect after September’s MPC meeting, when the country saw the first interest rate cut in years.
“As a nation we need to celebrate every victory, every milestone. It’s only with the public and private sectors working together, that we’ll see South Africa truly prosper.”
The next MPC meeting is on 30 January 2025.