South African Reserve Bank Governor Lesetja Kganyago, has announced that the repo rate (the rate at which banks borrow money from the Reserve Bank) will increase by 25 basis points to 6.75% per annum. This means all our bond/car installments will also go up by 0.25%. In Rand terms, and on a 20 year home loan, this effectively means an increase of R16.50 pm, for every R100 000.00 So on a R2 mill bond, it means around R330 a month more.
What does this mean on a larger scale?
As we all know, we have had several fuel price increases recently and this has had a knock on effect on the general cost of living, thereby pushing up inflation in October from 4.9% to 5.1% (Still well within the Reserve Bank’s target of 3 – 6%)
The good news (we hope!) is that the Automobile association has however predicted a significant drop in the fuel price this December, which would be a wonderful relief just before so many of us hit the roads in search of clear skies; surf and sand! Furthermore, for those who like to import and travel, the rand has appreciated by 3.8% against the US dollar and by 6.6% against the euro, since September. The SA Rand also firmed against the dollar immediately, following the announcement by 1.14% and by 0.06% to the Pound.
And if the fuel price does drop as the AA predicts, this should possibly see us remain at the present inflation (if not reduced) and the repo rate will hopefully hang in there a bit longer or maybe even come down again. So it is certainly not all doom and gloom.