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Prime Interest Rate Increase


Prime Interest Rate Increase

Category News

*Updated 25 May 2023

As the cost of living increases, many people will be concerned about changes to their finances. So what does a further 0.5% hike in the base rate mean for your money?


Those with cash in the bank are likely to see a very small rise in savings rates - however, the best savings deals will almost certainly be reserved for longer-term fixed rates.

While saving rates are nothing to shout about, it is important to maintain an ample cash pot for emergencies now and in the future as every penny in additional interest matters to help reduce the eroding effect of inflation on the purchasing power of cash savings.


Many homeowners will feel a slight pinch as they will be paying extra on their monthly bonds- a bond value of R1,000,000 will amount to of +- R10,837.

First-time buyers will be among the most heavily impacted by the rate hike. To get onto the property ladder, they often need to borrow the maximum amount available and are faced with higher interest rates as a result of high loan-to-value borrowing. 

That being said, conditions are still more favourable in comparison to pre-covid times. The major bond originator companies note that qualifying buyers can still find higher loan-to-value bonds while first-time buyers are still able to secure 100% bonds, with costs in some instances. 

Cost of living

The point of raising the base rate is to bring inflation back under control. At present, the majority of inflation is currently being driven by oil prices, and those are set internationally.
The other major driver of inflation is higher commodity costs which include food, cooking oil and clothing costs. Those are rising due to continued supply chain issues as shipping containers are in short supply, pushing up prices for those moving goods around the world.

However, a rate rise should lead to a stronger Rand, something that matters to the overall strength of the South African economy.

Our Reserve Bank has set an annual inflation target of between 4 to 6%. According to Stats SA, in June of 2022, the inflation rate reached a 13-year high, registering at 7,4%. Something had to be done. We have all seen prices rising across the board, from fuel to food, and this is a worldwide phenomenon caused by the shortages of supply that have resulted from the COVID-19 pandemic and more recently the Russian invasion of Ukraine. Inflation is therefore rising worldwide, and interest rates are also increasing worldwide.

If other countries raise their interest rates, they become a more favourable investment destination for foreign capital. Keeping our interest rates at the same margins vis a vis these foreign countries therefore also protects our country against disinvestment and helps to stabilize our exchange rates.

Based on these factors, it looks probable that interest rates will continue to rise for the foreseeable future before settling. 

Author ABC International Real Estate
Published 25 Mar 2022 / Views -
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