JOHANNESBURG - Interest rates were cut by 50 basis points to 6%, a relief for many citizens who are battling with home loans and other debts, but the move marked a sad day for pensioners who bet on higher int- erest for a return on savings.
Interest rates are now sitting at levels last seen three decades ago. The impact of the decision to cut rates will translate into lower monthly repayments for those who pay home loans.
To put the benefits into effect the big-four banks, First National Bank, Absa, Standard Bank and Nedbank, have announced that interest on mortgages will be decreased by 0,50% to 9,50% with effect from September 10.
This means people who have a R500 000 home loan over a 20-year term will pay about R4 661 per month. In late 2008 when the mortgage rate was sitting at 15,5% people paid about R6 769 per month on their home loans, according to Absa.
“It’s going to give you an extra disposable income at the end of every month and will help to ease those debt service costs. Generally it should also provide a bit of a boost to the consumption side of the economy,” said Jeffrey Schultz, a macro strategist at Absa Capital.
Jan Davel, new MD of the RealNet group, says the minimum monthly repayment on a 20-year home loan of R500 000 will decrease by R164. “This will obviously be of some help to existing homeowners, but the real benefit of the Reserve Bank’s decision this week is that it will make it easier for potential homebuyers to qualify for loans. For example, the monthly earnings required to qualify for a R500 000 loan at 9,5% will be some R15 500, compared to the R16 100 required at the previous prime rate of 10%.”
The 50 basis point decrease also affects payments in their prime overdraft rate and their vehicle and asset finance rate.
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By PHAKAMISA NDZAMELA
Source - Citizen.co.za
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