Impact of the latest repo rate cut - and why now is a great time to buy real estate

Earlier in November, the Monetary Policy Committee (MPC) announced a second drop in the interest rate for 2024. Jawitz Properties takes a look at the impact of falling interest rates for both prospective buyers and current homeowners paying off a home loan. Lastly, we reveal the future predictions for the interest rate in 2025.

Why now is a great time to buy property

The interest rate has dropped by 50 basis points in recent months, with all indicators pointing to further moderate drops in 2025. Home loans are usually linked to the interest rate, which means that your loan repayments will likely drop in 2025 if you buy in the remainder of 2024 or early 2025. The first year of homeownership is often the most financially taxing as you adjust to making these monthly payments as well as covering other costs like levies, rates and taxes. If you buy property now, you'll weather this first year in a climate of falling interest rates and rising opportunities.

Lower interest rates also mean greater buying power. Depending on your individual circumstances and credit score, the banks are more likely to approve higher loan amounts when the prime interest rate is lower. As a bonus, your monthly payments will also be more affordable than they would have been if the interest rate was higher.

How existing homeowners can capitalise on falling interest rates

The good news about falling interest rates doesn't apply only to prospective homeowners. Current homeowners will enjoy the relief that comes with slightly lower payments. A 25-basis-point reduction amounts to a saving of approximately R170 on a bond of R1 000 000 and just over R340 on a R2 000 000 home loan.

Those who can afford to, however, should consider keeping their home loan payments at the same amount they have been paying prior to the interest rate drops. Maintaining the higher payments means that you make a bigger dent into the capital amount that you owe every month and over time, this can potentially cut down the duration of your loan by years.

Looking ahead: what to expect for interest rates in 2025

According to economists, risks to the outlook increased slightly between their September and November meetings. This is due to changes in the global political landscape, and will lead policymakers to continue to tread carefully in the immediate future. For example, while the prime interest rate dropped by 25 basis points in September, there was speculation that a 50-basis-point drop may be implemented. In November, there was no discussion of the drop being any higher than 25 basis points.

Economists' current predictions point to the prime interest rate dropping by another 75 basis points during 2025.

If you're interested in buying property and capitalising on the lower interest rate, get in touch with the team from Jawitz Properties. We have expert teams in every corner of South Africa who are waiting to make your property goals a reality.