SA Reserve Bank maintains interest rates

South African Reserve Bank (Sarb) Governor, Lesetja Kganyago on Thursday announced the bank decided to keep the repo rate at 6.75%

South African Reserve Bank (Sarb) Governor, Lesetja Kganyago on Thursday announced the bank decided to keep the repo rate at 6.75% — with prime lending interest rate at 10.25%.

The repo rate is the interest rate at which the central bank lends money to other banks. Changes in the repo rate affect the prime lending rate, which is the rate banks use as a starting point to calculate interest rates for their clients. 

With the repo rate unchanged at 6.75%, the prime lending rate will remain steady at 10.25%. 

Kganyago said the SARB now expects GDP growth of 0.7% in 2018, 1.7% in 2019 and 2% in 2020.

The decision was unsurprising. "The general consensus [is] that rates will remain unchanged," said TreasuryONE in a morning note to clients. 

Unchanged rate welcomed

The unchanged rate has broadly been welcomed by real estate companies.

We need stability so that we can get on with rebuilding confidence and the economy, says Samuel Seeff, chairman of the Seeff Property Group.

Seeff said 2019 is a “year of great expectation” and the decision to retain the rate is the right one.

“Although inflation is a concern, it is weighted by the reasonably stable rand, declining fuel price, and Moody’s keeping the sovereign credit rating and outlook stable with a gradual strengthening of institutions and increasing transparency.

“South Africans should celebrate this small victory by doing what they can to pay off their pre-existing debts as aggressively as possible while interest rates remain stable,” says Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett.      

For those hoping to enter the property market, Goslett advises that they leave room in their budget for the possibility of higher instalments on their home loan should the MPC choose to announce interest rate hikes at further meetings in 2019. 

The rand, which was trading at R13.73/$ at 14:45, was changing hands at R13.74/$ after the announcement was made.