Repo Rate Cut
The repo rate has once again been cut bringing further relief to SA credit users.
As the saying goes: “every little bit helps”. It seems that the SA Reserve Bank (SARB) Monetary Policy Committee feel the same and have once again lowered the repo rate slightly to another all time record low.
The SARB Governor Lesetja Kganyago announced that the rate would be cut by another 25 basis points in July bringing the repo rate down to only 3.50%. This is good news for credit users since the banks link their lending interest rates to this repo rate. The lower it is, the less interest consumers end up paying for the existing credit that they already have.
Though a 0.25% reduction seems small it does help ease the interest burden of credit users, particularly bond holders, both in the short term and potentially saves them a lot in the long term.
The decision was driven primarily by factors surrounding the Covid-19 pandemic and lockdown and predicted contraction of the economy in the months ahead. The cost of basics and services (like electricity) were also taken into account as were current inflation figures and targets.
The Repo Rate Is Now 3.5%
If You Have The Means
If your cash flow has somehow only been minimally effected by the Covid-19 pandemic and lockdown then, now is the chance to make significant inroads into the total debt you have outstanding by taking advantage of the low interest rates.
When rates are low it means more of your monthly payment is actually been allocated to the outstanding amount owed rather than just interest on that amount. If you can increase the amount you are paying in the next few months this means you are chipping away at the capital amount faster, which, in turn, means that you will pay less overall to settle your debts.
For example, bond holders who repay their bond over 25 or 30 years will likely be paying up to 3 times the amount they borrow to settle their debt due to interest and fees. A bond of R1Million could end up taking R3Million to settle over the decades. If the bond holder can however pay more than the bank is asking each month they could shave several years or even a decade off their payments by pushing up monthly payments.
If you have the means right now to take advantage of the lower interest rates then this is something to give serious consideration.
If you are on the other end of the spectrum and are scared of losing your assets due to the Lockdown and pandemic then why not speak to a Debt Counsellor for free advice?