The South African Reserve Bank (SARB) has lowered its repo rate by 25 basis points, bringing it down to 8% per annum, effective from 20 September. The finance industry views the decision as consistent with global trends, while some stakeholders in the property sector would have preferred a 50 basis point cut.

READ MORE: Interest Rates have been cut, more relief on the way

FNB CEO, Harry Kellan, expressed support for the SARB’s decision, noting that it reflects global moves towards lower interest rates. However, Kellan remained cautious, noting that he does not anticipate a “major cutting cycle”.

“Inflation expectations remain above the Reserve Bank’s target mid-range of 4.5%, with average inflation for 2024 around 5%.”

Kellan added that while the Rand’s recent strength, alongside lower fuel prices and stable electricity supply, has boosted confidence, further rate cuts will likely be modest and data-driven.

The property sector also responded positively. Director at High Street Auctions, Greg Dart, says the rate cut’s potential to boost South Africa’s property market and investor confidence.

“It would have been great if the Monetary Policy Committee followed the US Fed’s larger cut, but the SARB’s cautious approach is sensible.”

Dart says that the stronger Rand, coupled with inflation falling below the Reserve Bank’s 4.5% target for the first time since 2021, has been crucial in restoring faith in the economy.

“The uninterrupted power supply has also been a major factor in stabilising the economy.”

For debt-burdened consumers, the announcement is a welcome relief.

Lew Geffen Sotheby’s International Realty CEO, Yael Geffen, described the rate cut as “the best news for South African consumers in four years.”

Geffen says that although the cut is small, it will have a noticeable impact on household finances, particularly in bond repayments. She also predicts a surge in property market activity as a result, with buyers capitalising on the lower interest rates.

“On a bond of R2 million, this cut translates into more than R300 savings per month.”

Senior economist at FNB Commercial Property Finance, John Loos, anticipates that the Reserve Bank will cut interest rates by another 25 basis points in November. He says the immediate financial impact might be minimal, but emphasised that such a cut could improve market sentiment.

“There’s borrowers, and they would love more cuts, but then there’s depositors as well. And they wouldn’t necessarily love more cuts. The Reserve Bank really needs to worry about balances in the economy. It needs to focus on inflation, focus on big macroeconomic imbalances. That’s what policies are really for, as opposed to fuelling credit-driven growth.”