repo rate

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SA’s repo rate slashed by 1% to its ‘lowest value on record’

Overall, this is good news for South Africans. The repo rate has tumbled on Tuesday, as the Reserve Bank ramp-up efforts to keep the country going.

repo rate

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The Monetary Policy Committee (MPC) of the South African Reserve Bank has decided to cut the repo rate by 100 basis points on Tuesday, plunging the figure to its lowest-ever point.

What is the new repo rate in South Africa?

This takes us down to 4.25%, slashing the value by a total of 1%. The decrease mirrors similar cuts we saw to the interest rates last month, too. The prime rate, meanwhile, has also decreased significantly, down to 7.75%

The pros and cons of a reduced repo rate

The drop, according to Investec, affects South Africans in the following ways:

  • A lower repo rate makes it less expensive for banks to borrow money from the Reserve Bank, which may have a positive impact on interest charged on credit;
  • It may also positively impact the price of property with greater benefits for cash buyers; and
  • Prime-linked loans get a bit of reprieve with a reduction in interest rates.

However, when rates on home mortgages and credit cards fall, the rates on other savings vehicles fall as well. Keeping things like repo and interest rates at a low rate for an extended period of time can reduce the number of options the government has to stimulate the economy: The avenue eventually becomes a dead end. The reduced repo rate is good news on the surface, but it’s not without its drawbacks.

Good news for the many, or just the few?

As the various rates tumble, the next area of focus shifts to how this relief can be felt properly by all consumers: