The South African Reserve Bank (SARB) Monetary Policy Committee (MPC) is likely cut the interest rate next week, according to Thys van Zyl, CEO of Everest Wealth.
Another interest rate cut could be on the cards next week, and again in January, while waiting to see if the policies of United States President-elect Donald Trump will possibly push up inflation and end the current cycle of interest rate cuts.
Earlier this month, the US Federal Reserve announced a second consecutive interest rate cut of a quarter of a percentage point after cutting its interest rate by 50 basis points in September. That was the first cut in more than four years.
Van Zyl said they are now waiting to see if Trump's policy of higher import tariffs will possibly increase inflation.
"The Fed will decide on the interest rate again in December and it is expected that another cut will be announced, but thereafter, the Fed may start to become more cautious and eventually announce fewer and lower cuts than what was expected a few months ago. The MPC will announce their decision next week and then again in January,“ Van Zyl said.
"The cycle of interest rate cuts is expected to continue at least until March to bring about a total drop of at least a percentage point. The interest rate rose by 475 basis points from November 2021 and was lowered again for the first time in September this year, after being kept unchanged for more than a year."
According to Van Zyl, another interest rate cut can stimulate economic growth as well as give over-indebted consumers a much-needed break, and it could lead to a bolstering in retail sales and consumer spending which could be good news for both the property and car markets.
Van Zyl said: “A second consecutive interest rate cut could also further help consumer spending and households' ability to service their debts in time for the December festive season.
“Another reduction in January will give consumers a welcome boost after the festive season and another reduction in March can help supplement consumers' disposable income."
According to Adrian Goslett, the regional director and CEO of RE/MAX of Southern Africa, while it cannot be certain how far interest rates will drop, homeowners and buyers should remain cautious but optimistic.
Goslett said: “Buyers and sellers will need to weigh up both the opportunities that exist within the current market as well as their long-term financial plans to decide how best to proceed given the current market.”
If there is another interest rate cut next week, it can lower monthly bond repayments, but if rates stay the same, it's still wise to act, as property prices will continue to increase regardless.
“The best time to buy or sell a home is when you're financially ready, regardless of market conditions. Timing the market perfectly is difficult, but owning property remains one of the most reliable ways to build long-term wealth,” Goslett said.
“While potential interest rate cuts may benefit buyers and sellers in the short-term, ultimately, real estate is a long-term investment, and waiting too long could mean missing out on current opportunities.”
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