November 21 2024 18:30
The SA Reserve Bank cut rates on Thursday November 21. This was the second cut of the year as the cutting cycle continues.
The Bank announced a 25 basis points reduction in the repo rate, lowering it to 7.75%. This latest rate cut moves the prime lending rate down to 11.25%. This is expected to bolster homebuying activity following subdued demand in the ‘higher for longer’ interest rate environment.
Rhys Dyer, CEO of bond originator, the ooba Group said the news of another rate cut should be welcomed.
“The financial relief from this month’s announcement, together with September’s rate cut, will be felt by homeowners and prospective homebuyers across the country,” he said.
The rate cut was underscored by a positive outlook for inflation, with consumer inflation easing to 3.8% and producer inflation dropping to 1.0% in September.
“Despite a minor increase in the petrol price earlier this month, the overall economic outlook remains relatively upbeat,” said Dyer.
Dyer said that while the recent US election results may have created uncertainty around future economic policy, more clarity will emerge once the new administration takes office.
“On one hand, tax cuts and deregulation may drive growth but on the other, potential tariff hikes and immigration limits could increase inflation, restricting future interest rate cuts by the US Federal Reserve,” he said.
Regardless of the outcome, Dyer said that it was likely that the Bank will take a more cautious approach to the timing and extent of future interest rate cuts.
“We do however hope that these considerations will not hinder the progress being made in the homebuying sector, and that rate cuts will continue into 2025 as initially projected,” he said.
As reflected in its October 2024 figures, Dyer said that ooba Home Loans had already seen a positive response to the rate cut implemented in September.
“October marked the first significant shift in consumer demand for property, with home loan applications rising 16% compared to October 2023 and 27% on the previous month. This demonstrates the impact of even a single 25-basis-point interest rate reduction,” he said.
Now totaling 50 basis points, the rate cuts in 2024 alone equate to monthly savings of R344 on a R1m home loan, totaling savings of R82,683 over a 20-year home loan period.
“These savings are sure to stimulate home buying activity, especially among the prized first-time buyer segment, which is anticipated to drive the market’s recovery,” said Dyer pointing to a healthy increase in first-time homebuyers in September of almost half of total applicants, almost rising above the 50% mark for the first time since the fourth quarter of 2022.
alistair@propertyflash.co.za
