No Repo Rate Cut expected, but perhaps needed

The SARB is set to announce its decision on whether or not to decrease the repo rate even further, this Thursday, the 23rd of May. The repo rate has been stable, at an unprecedented low of 5%, since the Monetary Policy Committee meeting of July 2012.
At present no one is seriously expecting Reserve Bank governor, Gill Marcus, to lower either the repo rate or the prime interest rate (which currently sits at 8.5%) before October, at the earliest. "The question isn't whether the MPC will lower the repo rate now, which I don't expect them to, but rather whether now isn't perhaps the time to do it", says Jan le Roux, CEO of Leapfrog Property Group. 
Andre Mellet, economics lecturer at the Northwest University's Vaal Triangle Campus, told Business Day that there are a number of compelling arguments for a rate cut: the growing unemployment figures, the slow growth rate of the SA economy as well as the deficit on the government's budget are all good reasons to opt for a rate cut - in favour of economic growth. The continued malaise of the global economy is also likely to put more pressure on the SARB.
That said Mellet believes that the MPC is primarily concerned with price stability and the control of inflation, not with economic growth.
"A rate cut could give home owners a bit of breathing room in which to consolidate their debts. Household debt is still far too high in South Africa and, as we all know the rates will have to go up again at some point, now is the time to clear as much debt as possible. A rate cut would certainly make this easier", believes le Roux. "It will likely stimulate growth as well; Japan seems to benefit from their increased money supply. "
However, Matthew Sharrat, Bank of America Merrill Lynch global research South Africa economist, told Business Day that they're expecting both international and local economic growth in the second part of the year.

"Should Sharrat and co's predictions prove accurate, and the economic situation worldwide does improve, then a rate cut wouldn't be as necessary", says le Roux. He continues to point out that a rate cut in the interim would still ease pressure on households contending with increase rates, electricity and higher consumer price inflation.
Jan reiterates; "Regardless of a rate cut now, or in the future, I strongly advise home owners to cut down on unnecessary spending and debt as much as possible. The economic situation, both domestic and international, is far from stable and the best defense against future hardship is to cut down on debt".

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 20 Apr 2018
      Whenever changes in the political ecosystem of a traditional property market create uncertainty, smart investors begin to look elsewhere for new opportunities. Property experts at IP Global have analysed the trends and crunched the numbers to find new markets to explore in Europe and the United States.
    • 20 Apr 2018
      Energy and water self-sufficiency are increasingly important factors in home buyers’ choice of property – especially in Cape Town where the extreme drought of the past few years has made municipal supply costly as well as uncertain.
    • 19 Apr 2018
      During the last decade, rampant development has progressively transformed Cape Town’s property landscape with densification being the order of the day, but there are still one or two hidden gems like Scarborough which have retained their original character, offering an inimitable lifestyle and an attractive investment opportunity.
    • 19 Apr 2018
      The rental market is a cut-throat sector of the real estate market that waits for nobody. According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, first-time renters need to be fully prepared before they even start the process of looking for a place to rent in order to avoid the disappointment of losing out on their ideal property.
    • 19 Apr 2018
      Choosing to buy your first home instead of continuing to rent is a big decision that will usually take some time to put into action, but the sooner you can save up a sizeable deposit, the closer you will be to reaching your goal.
    • 18 Apr 2018
      Selling your home is no small task and as you will quickly find out, there are a lot of misconceptions about the process. Gerhard van der Linde, Seeff's MD in Pretoria East lists the top 5 misconceptions when you are selling your home.
    • 18 Apr 2018
      The Cape Town municipality is now installing water-management devices at properties that have been non-compliant with the new level 5 water restrictions and there are talks of fines between R5,000 and R10,000 for households that use too much water.
    • 17 Apr 2018
      The recent interest rate cut has stoked the coals in the first-time buyer’s market. At least for the next two months until the next interest rate announcement, homeowners are guaranteed lower monthly instalments than in the previous quarter. But, is it wise to take out a 100% bond just to enter the property market while interest rates are low?
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us