Here’s why property investors win with the lower interest rate
What better way to start a week than with good news on the property investment front?! This past Thursday, the South African Reserve Bank’s Monetary Policy Committee announced a cut in the interest rate from 6,75% to 6,5%.
Now, you might say, “Why is everyone making such a fuss about such a small cut?” Let me tell you… The last time the benchmark interest rate was cut was March 2018 and last week’s cut, combined with the recent petrol price cut, is a relief for salary-earners and property investors alike and also good for market sentiment.
The first big win from the interest rate cut is the lower prime lending rate, which is usually the lowest rate at which banks start lending to clients. Right now, the lending rate is 10% instead of 10,25%, and over time, this means better cash flow for property investors.
If you are an existing property investor, you will save ±R16 a month per R100 000 borrowed. Therefore, on an R1 million loan, you will save ±R166. This might not seem significant; however, for a 20-year loan this becomes an R40 000 interest saving!
The second win from the interest rate cut is for first-time property investors. The lower interest rate means borrowers should find it a little easier to qualify for a loan.
Lastly, with most people’s budgets under pressure, the lower interest rate provides a bit of breathing room and makes property ownership more affordable for everyone.
And although the interest rate cut won’t solve all our problems, it’s a great opportunity to further your property investment portfolio. So, go ahead and make the most out of the interest rate cut and win, win, win!