Optimism for rate cuts varies between banks, but don’t expect a rate cut windfall.

The aggressive rate increases since November 2021 have brought significant financial stress to consumers, especially those with large asset-based loans such as mortgages and car finance.

If you had a R1 million bond on your home, you would have seen your repayments increase by R3 000 a month. This is a growth of over 40% in instalments since November 2021.

If you bought a car for R280 000 in 2020, your installments would have increased from R5 247 to R5 924 per month by 2024. That is a 13% increase in car repayments.

That means a consumer with a R280 000 car finance and R1 million mortgage would be paying nearly R3 700 more in repayments each month.

The good news is that interest rates are predicted to start falling towards the end of the year. The bad news is that the rate cuts will likely be slow and in small increments of 25 basis points.

We asked the major banks to provide their predictions on rate cuts over the next year. These predictions range from only a 50 basis-point accumulative rate cut by July 2025 up to an accumulative rate cut of 125 basis points.

Even based on the most optimistic rate cuts of 125 basis points, on a R1 million home loan, the repayments would only reduce by around R900 by next year. This is nowhere close to the nearly R4 000 repayment increase experienced since 2021.

Least optimistic: FNB at 50 basis points

FNB’s senior economist Siphamandla Mkhwanazi forecasts 50 basis points worth of rate cuts by the Reserve Bank’s Monetary Policy Committee (MPC) in the next 12 months. This would mean the prime lending rate would decrease from 11.75% to 11.25%. For a R1 million, 20-year mortgage at prime, the instalment would decrease from R10 837 to R10 336 by July next year – a reduction of R501 per month.

Some optimism: Absa at 75 basis points

Absa anticipates an initial 25 basis point rate cut by the MPC in November this year, followed by a further 50 basis points throughout 2025 bringing the total rate cut to 75 basis points. That would bring the prime lending rate to 11% by July 2025.

More optimistic: Standard Bank at 100 basis points

The Standard Bank house view is that there will be two interest-rate cuts this year and two next year, each being 25 basis points. The bank expects the first rate cut at the next MPC meeting in September, and for there to be a cumulative 100 basis point cut by July 2025, bringing the prime lending rate to 10.75%.

Most optimistic: Nedbank at 125 basis points

Nedbank’s interest rate expectation is two cuts in 2024 (in September and November) taking prime from 11.75% to 11.25% by the end of the year. In 2025 the bank expects three cuts (March, May and July) taking prime to 10.5% by year end.

This article first appeared in City Press.