Reserve Bank keeps repo rate stable

2014-03-27 16:11

The SA Reserve Bank (Sarb) is keeping its key lending rate on hold at 5.5%, said governor Gill Marcus on Thursday.

The repo rate is the interest rate at which the Sarb lends money to commercial banks. This implies that banks will not increase their prime lending rate of 9%.

In January, consumers were hit with a shock repo rate hike of 50 basis points at the Sarb’s monetary policy committee (MPC) briefing.

The unchanged repo rate is good news for aspirant home buyers and those with existing home loans, said Andrew Golding, CEO of the Pam Golding Property group.

“Home buyers continue to be constrained by a variety of cost factors which remain on an upward trajectory such as fuel and transport, electricity, municipal rates and utility charges – in other words the costs associated with owning a home – and commuting to the workplace,” said Golding.

He said although the criteria for access to credit remained stringent, banks’ appetite for mortgage lending had improved further with some relief regarding the average deposit required, and even 100% bonds being granted in certain instances, particularly in the lower end of the market.

“The first quarter of 2014 has reflected a marketplace which demonstrates a resurgence in confidence among home buyers, investors and developers, resulting in rising sales volumes [unit sales] and capital value, from a general market and a Pam Golding Properties perspective,” said Golding.

First National Bank (FNB) will maintain its prime lending rate at 9% after the Sarb’s decision to keep rates on hold until the next MPC meeting on May 22.

“While rates remain unchanged for the next two months, the likelihood of further hikes in 2014 cannot be excluded,” said Jacques Celliers, CEO of FNB.

“I urge consumers to act with care and plan ahead for the remainder of 2014 with the possible impact of higher interest rates in mind,” he said.

He pointed out that Sarb had stated that its stance would remain accommodative to enable economic growth.

“However, as inflation rises, we expect rates to be adjusted upward. In doing so, the Reserve Bank maintains our effective rates on an even keel,” said Celliers.

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