The South African Reserve Bank (SARB) might lower interest rates by up to 150 points by the middle of 2025. This could mean that people who have taken out loans to buy cars could save a lot of money every month.
Contents
R308 Monthly Relief for Car Owners in South Africa
In May, the SARB group that decides on interest rates chose to keep them the same. This means the repo rate stayed at 8.25%, and the prime lending rate stayed at 11.75%. Economists think these rates will stay the same when the group meets in July and that any reductions in the rates will be delayed until the September meeting.
Check This
Predictions for Future
Annabel Bishop, the main economist at Investec, thinks a smaller rate cut could happen in November or maybe even as late as January 2025. The Bank of America (BofA), on the other hand, thinks there will be a series of 25-point cuts starting in January 2025, followed by a total of 100-point cuts in the following months.
Detailed Forecast by Investec
Investec thinks the cycle of rate cuts will end after a total reduction of 150 points, possibly around mid-2025. Here’s a detailed forecast:
Meeting |
Move |
Rate |
|---|---|---|
May 2024 |
Hold |
8.25% |
July 2024 |
Hold |
8.25% |
September 2024 |
Hold |
8.25% |
November 2024 |
-25 bps |
8.00% |
January 2025 |
-50 bps |
7.50% |
March 2025 |
-25 bps |
7.25% |
May 2025 |
-25 bps |
7.00% |
July 2025 |
-25 bps |
6.75% |
September 2025 |
Hold |
6.75% |
How Car Owners Will Benefit
The maximum forecast of 150 points is anticipated to provide significant relief to car owners in South Africa who have loans. This adjustment is expected to take effect as early as November and is likely to have a positive impact on individuals with car financing responsibilities.
Current Financial Strain
The policy rate that was decided upon a year ago has caused interest rates to remain unchanged for an extended period. This has caused additional financial pressure on numerous households, exacerbated by the rising costs of electricity, fuel, and property rates.
Savings for Car Owners
WesBank reported that the average new vehicle financed through their institution amounted to about R410,000. If individuals purchased a car at this price and secured a loan at prevailing rates, they would save R270 per month on their payments if the projected prime rate of 10.25% by July 2025 is accurate. Nevertheless, this financial benefit diminishes as the car’s price rises.
Here’s a table showing how much you’ll save on your bond every month if the forecasted 150 point interest rate cuts happen next year:
Value of the car |
Current rate (11.75%) |
Expected by July 2025 (10.25%) |
Change |
|---|---|---|---|
R175 000 |
R3 966 |
R3 835 |
-R131 |
R200 000 |
R4 519 |
R4 369 |
-R150 |
R225 000 |
R5 072 |
R4,903 |
-R169 |
R250 000 |
R5 625 |
R5,437 |
-R188 |
R275 000 |
R6 178 |
R5,971 |
-R207 |
R300 000 |
R6 731 |
R6,506 |
-R225 |
R325 000 |
R7 284 |
R7,040 |
-R244 |
R350 000 |
R7 837 |
R7,574 |
-R263 |
R375 000 |
R8 390 |
R8,108 |
-R282 |
R400 000 |
R8 943 |
R8,643 |
-R300 |
R410 000 |
R9 164 |
R8 856 |
-R308 |
R450 000 |
R10 049 |
R9,711 |
-R338 |
R500 000 |
R11 155 |
R10,780 |
-R375 |
R550 000 |
R12 261 |
R11,848 |
-R413 |
R600 000 |
R13 367 |
R12,917 |
-R450 |
R650 000 |
R14 473 |
R13,985 |
-R488 |
R700 000 |
R15 579 |
R15,054 |
-R525 |
R750 000 |
R16 684 |
R16,122 |
-R562 |
R800 000 |
R17 790 |
R17,191 |
-R599 |
R850 000 |
R18 896 |
R18,259 |
-R637 |
R900 000 |
R20 002 |
R19,328 |
-R674 |
R950 000 |
R21 108 |
R20,396 |
-R712 |
R1 000 000 |
R22 214 |
R21 465 |
-R749 |
Stakeholder Reactions
A number of individuals in the automotive industry have expressed their disappointment with the decision to maintain the current interest rates. They believe that a rate cut is necessary for the new vehicle market, which has seen a 7.4% decline in sales to 246,052 units so far this year. This decrease suggests that the market may not achieve 500,000 units this year.
Market Challenges
“Vehicle price inflation, high interest rates, and the general rising costs of living are all making it hard for new car buyers to enter or stay in the market,” said Lebo Gaoaketse, Head of Marketing and Communication at WesBank. “Until there is some relief in interest rates, greater incentive deals from manufacturers, or a big change in general inflation or earnings, the new vehicle market will continue to be under pressure.”
Broader Economic Impact
Lowering interest rates could significantly impact the automotive industry. This financial change would motivate people to make large purchases, boosting sales and supporting businesses all along the supply chain. The repercussions would extend beyond the real estate and automotive sales sectors.
A substantial decrease in interest rates would yield numerous positive effects on the broader economy. The rise in consumer spending would result in a noticeable increase in demand, prompting higher production levels, job creation, and an enhanced economic forecast.
Click the link to know more.
Gaurav, an exam specialist with a passion for education, writes comprehensive articles on exam results and admit cards. His expertise ensures students receive reliable information and useful tips to excel in their exams.