Thousands of motorists will benefit from reduced monthly car repayments after the South African Reserve Bank on Thursday decided to decrease the repo rate with 0.5 percentage points.

Thousands of motorists will benefit from reduced monthly car repayments after the South African Reserve Bank on Thursday decided to decrease the repo rate with 0.5 percentage points.


The SARB decreased the rate to 7,5 per cent, and large merchant banks immediately lowered their prime lending rates.


The prime lending rate, the barometer against which loans are granted to consumers, was lowered from 11.5% to 11%, which puts more money in pockets of consumers who have a bond or are holding financing packages for a vehicle.


The strong rand means inflation is lower than was previously thought. With inflation under control, the Reserve Bank has the space to pass the benefits on to consumers.


Thursday's rate cut was the first this year after the Reserve Bank cut rates by 5.5 base points last year. And although the move came as a surprise, economists say that the Reserve Bank is in no way acting in a risky fashion… Real interest rates, meaning the difference between prime and the CPIX inflation rate, are standing at six per cent and can go up to seven next month.


The Reserve Bank's inflation targets of between three and six per cent rest on the CPIX index. Some observers expect a further cut of 50 base points during the next six months.

Original article from Car