What the repo rate cut means to you

Herschel Jawitz, CEO of Jawitz Properties, says that the decision to cut interest rates by 0.25% will be welcomed by consumers. It will be well received not only financially, but may also start to halt the slide in consumer confidence that has been apparent in South Africa over the last year. Despite the uncertainty over downgrades, the low inflation figures could no longer be ignored by the Reserve Bank and the decision to cut rates is appropriate and possibly overdue. "It's early in the year but so far it doesn't look like government policy is going to do anything to build consumer and business confidence by removing uncertainty on issues such as land and dealing with the SOEs.

Businesses and consumers are going to have spark the economic recovery of the country in spite of the economic gloom and SOE crisis, especially that of Eskom. A rate cut of 25 basis points decreases a homeowner's monthly repayments by R160 per million rand of bond. It doesn't sound like much but if you factor in that other debt repayments will come down as well as the most recent decrease in petrol prices, this may give consumers some extra money at the end of every month," says Jawitz.

From a residential market point of view, Jawitz says that the benefit of the rate cut will really be the impetus needed for first-time buyers and the lower and middle markets. "With marginal price growth and, in some areas falling prices, together with a very favourable lending environment, the current market offers the best buying opportunities across the market since 2009. The real key as to why more buyers are not taking advantage of this market is not financial but rather confidence; and the rate cut may benefit both," concludes Jawitz.