The Prime rate - why it matters
What is the Prime rate?
The Prime rate is the interest rate that banks charge their most credit-worthy customers when they borrow money. Monthly mortgage repayments are determined by the Prime rate. When rates drop, your monthly loan repayment decreases. Conversely, your repayment becomes more expensive when Prime is increased.
Prime rate Historically:
Prime has come down from a high of 11,75% in May 2024. The South African Reserve Bank (“SARB”) recognised that high interest rate environment is stifling the economy and commenced cutting rates in September 2024, albeit extremely conservatively. The last reduction was in January 2025 when prime was reduced to 11%.
What to expect:
A low interest rate environment would give the local economy a much-needed boost. However, chaotic global conditions coupled with domestic challenges and a rocky relationship with our second largest trading partner means that the SARB will take a cautious approach to the rate cutting cycle.