The 1% interest rate cut announced by the Monetary Policy Committee (MPC) this week came at a time when the economy needed it most.
Ongoing load shedding and global panic around the coronavirus is grinding the South African economy to a holt, and Adrian Goslett, regional director and chief executive of Re/Max of Southern Africa remained hopeful that the interest rates would drop to align with international standards.
The US Federal Reserve cut interest rates at the beginning of March to stimulate their economy. The South African repo rate is now 5.25%. “It is encouraging that the MPC has made the decision to lower interest rates at this meeting, as this will help towards keeping our economy somewhat stable over this time,” he says.
Rawson Property Group chairman Bill Rawson agrees: “A 1% drop in interest rates is excellent news for existing and future homeowners. It certainly will stimulate and encourage the buyers.”
The cut is “great news” for first-time buyers, says Mike Greeff, chief executive of Greeff Christie’s International Real Estate. For prospective buyers who are in the middle-income groups, the repo rate cut means that purchasing a home becomes more affordable and more attainable.
“The repo rate cut came as no surprise given the current state of the economy – not just in South Africa, but worldwide. The Covid-19 virus is wreaking havoc on the global economy, and no one can forecast the long-term consequences.”
He says the MPC’s reason for the cut is an effort to try and stimulate the economy due to the effects of this pandemic.
The reduction in the interest rate, coupled with next month’s (April) likely substantial drop in the fuel price as a result of the dramatic reduction in global oil prices affords some relief to South African consumers and “hopefully part of the boost our economy needs right now”, says Andrew Golding, chief executive of the Pam Golding Property group.
Seeff Property group chairman Samuel Seeff notes that the cut takes the interest rate down to levels last seen in the 2012/3 period and is at one of the lowest levels in decades. It will provide much needed relief for households and small businesses and aid those with debt and home loans. It will also provide a vital boost for the property market, he says.