Following a 0.25 basis point (bp) cut in interest rates in September, the South African Reserve Bank (SARB) has slashed lending rates by a further 0.25bp during its latest meeting on 21 November 2024.
As such, the national repo rate is now pegged at 7.75% and the prime interest rate at 11.25%.
This comes after South Africa experienced a significant easing in consumer price inflation. Inflation dropped to 2.8% in October, just outside the SARB’s target range of 3-6%, a development that was driven by lower fuel prices, an appreciating rand, and slowing global inflation.
South Africans financing their cars on a linked interest contract will rejoice in the improved lending terms, as it means they will be paying less on their finance instalment from November onwards.
The table below shows how the new interest rate of 11.25% will impact your monthly car finance contract, based on a 72-month deal with no deposit or balloon payment:
| Car price | Monthly instalment at 11.50% | Monthly instalment at 11.25% | Difference |
|---|---|---|---|
| R100,000 | R2,021 | R2,008 | -R13 |
| R200,000 | R3,951 | R3,925 | -R26 |
| R300,000 | R5,880 | R5,841 | -R39 |
| R400,000 | R7,809 | R7,757 | -R52 |
| R500,000 | R9,738 | R9,673 | -R65 |
| R600,000 | R11,667 | R11,590 | -R77 |
| R700,000 | R13,596 | R13,506 | -R90 |
| R800,000 | R15,525 | R15,422 | -R103 |
| R900,000 | R17,454 | R17,338 | -R116 |
| R1.0 million | R19,383 | R19,255 | -R128 |
| R1.1 million | R21,313 | R21,171 | -R142 |
| R1.2 million | R23,242 | R23,087 | -R155 |
| R1.3 million | R25,171 | R25,003 | -R168 |
| R1.4 million | R27,100 | R26,919 | -R181 |
| R1.5 million | R29,029 | R28,836 | -R193 |
| R1.6 million | R30,958 | R30,752 | -R206 |
| R1.7 million | R32,887 | R32,668 | -R219 |
| R1.8 million | R34,816 | R34,584 | -R232 |
| R1.9 million | R36,745 | R36,501 | -R244 |
| R2.0 million | R38,675 | R38,417 | -R258 |
Cautious optimism
SARB Governor Lesetja Kganyago noted that the institution remains cautiously optimistic regarding future interest rate decisions.
Mixed economic indicators suggest that near-term growth may not meet expectations, however, green shoots such as lower inflation a more positive sentiment over South Africa and its credit rating could outweigh the negatives.
“Growth could be higher from next year, given ongoing reforms. These include structural reforms, especially in the network sectors, such as electricity and transport,” he said.
“We continue to see headline inflation stabilising near our midpoint objective over the forecast horizon. In this context, we anticipate inflation expectations will moderate further.”
In the same breath, he warned that international interest rates could move up once more, and the rand remains on shaky ground given how easily it is impacted by the global economic environment.
Regardless, the SARB sees room for another 50bp worth of interest rate cuts as it forecasts a stabilisation of the repo rate at slightly above 7%.
“Such decisions will continue to be outlook dependent, responsive to data developments, and sensitive to the balance of risks to the forecast,” he said.
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