The Monetary Policy Committee has been commended for acting boldly and cutting the rate by a further 1% to help ease the financial burden on South Africans during the lockdown period.
“I think it was a timeous decision and I applaud the committee for taking such proactive measures to help consumers and small businesses survive within the current circumstances,” says Adrian Goslett, chief executive of Re/Max of Southern Africa. Although the decision will have negative consequences for the Rand, he believes the upside benefits outweigh the downside risks that the cut poses for our economy.
“The immediate relief this decision provides to both consumers and businesses is exactly what our country needed at this time.” He notes, however, that South Africans would be wise to use the interest rate cut to pay off debt as quickly as possible.
“If you can afford to do so, keep your repayments at the same value before the cut...If you cannot afford to do this then use the money you save on interest charges to avoid purchasing items on credit and getting yourself into further debt.”
Richard Gray, chief executive of Harcourts South Africa also welcomed the decision to bring the interest rate down to 4.25% as it makes buying a home more affordable. It also boosts consumer confidence which translates into increased economic activity in these uncertain times.
“The man on the street is certainly bearing the brunt of an economy under serious pressure and as the long term affects remain unclear at this point this announcement today will help many consumers breathe a sigh of relief and help mitigate the ominous situation we face from a financial perspective.”
The cut also means that the prime lending rate has dropped from 8.75% to 7.5%, notes Mike Greeff, chief executive of Greeff Christie’s International Real Estate.
“This is unprecedented and is certainly a response to Covid-19 as a cut in repo rate is necessary to mitigate the effects the virus has had on the economy. It is also seen as a necessary means to try and restore the economy once the lockdown has been lifted.”
It will be somewhat easier for South Africans to qualify and pay off their home loans, once things return to normalcy, he says. “The decision to cut the repo rate by a further 1% shows us the seriousness of the virus’ effects on the economy and the earnest efforts the Reserve Bank is making to ensure that our economy keeps going.”
The decision was also applauded by Samuel Seeff, chairman of the Seeff Property Group., who says it is “absolutely necessary” for the economy and property market. It also takes the interest rate to a new historic low.
“Together with the previous cut, this is vital for when the country comes out of the Covid-19 Lockdown and the recovery starts.” He says the two rate cuts provide a saving of about 20% for property buyers and is a significant boost for demand, adding that he expects the property market to emerge from the lockdown with a level of pent-up demand, mainly in the primary residential market to around R1.5 million.
While acknowledging that the rate cut will not offset the negative effects total income loss for those not able to work from home or designated as essential workers, Andrew Golding, chief executive of the Pam Golding Property group, the MPC’s move will help ease the pressures on the residential housing market. It will assist those with mortgages or seeking finance to acquire a home.
“From a property perspective, it is hoped that part of the easing of lockdown restrictions will include reopening or at least partial reopening of the Deeds Office which will enable transfers to be processed regarding successfully concluded sales transactions, which would aid indebted, distressed sellers already severely impacted by the current economic recession.
“Furthermore, the freezing of the property industry, which is currently in limbo to a large degree, means that government is precluded from receiving much-needed revenue from transfer duty, which is a significant contributor to SARS.”
FNB chief executive says the SARB is taking “bold steps” in “extraordinary circumstances” to shield people and businesses from the impact of a world-wide pandemic.