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Prime Lending Rate Increased By Reserve Bank From 11.25% to 11.75%

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Prime Lending Rate Increased By Reserve Bank From 11.25% to 11.75%

As economists and investment specialists expected, the Reserve Bank's Monetary Policy Committee (MPC) hiked the prime rate for a 10th consecutive time since November 2021 by another 0,5% to 11,75 %.

Effect on home loans and buyer affordability:

  • A loan of R500 000 will now require a monthly income of about R18 062 - with a monthly instalment of R5 419;
  • A loan of R1 000 000 will now require a monthly income of about R36 124 - with a monthly instalment of R10 837;
  • A loan of R1 500 000 will now require a monthly income of about R52 465 - with a monthly instalment of R16 256;
  • A loan of R2 000 000 will now require a monthly income of about R72 248 - with a monthly instalment of R21 674;
  • A loan of R3 000 000 will now require a monthly income of about R108 371- with a monthly instalment of R32 511

South Africa now has the highest interest rate in a decade, with the repo rate at 8.25%.

The SARB has implemented a cumulative 485 basis points of hikes in this cycle to bring rising inflation within its target band of 3% to 6%. However, inflation has remained stubbornly high and March's inflation data showed CPI standing at 7.1% and food inflation at a 14-year high of 14.0%. In addition, load-shedding continues to place upside pressure on inflation.

The fact that both power cuts and high interest rates mute economic growth would have been an important factor for the SARB to consider. Since the last MPC meeting, the Rand's weakening has also become an increasingly important factor to consider.

The rand fell to its lowest point against the US dollar last week after the US ambassador to South Africa accused the country of supplying Russia with weapons to aid its war against Ukraine. The currency has remained above R19/USD since.

Author Benhard Wiese
Published 26 May 2023 / Views -
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