Repo rate changes

Understanding how they affect you.

What is a repo rate? 

The South African Reserve Bank (SARB) lends money to South African banks at a rate known as the repo rate. Banks lend money to their clients at a rate called the prime interest rate

The prime interest rate is linked to the repo rate. So, when the repo rate changes, the prime interest rate also changes. 


Understanding the impact for you


When the repo rate increases, the following happens:

  1. Interest rates on your home or car loans will increase, which in turn will increase the monthly repayments.*
  2. Interest rates on your savings or investments will also change. Banks may offer higher interest rates for saving money, which is an advantage if you have extra money to save.

When the repo rate decreases, the opposite happens:

  1. Interest rates on your home or car loans will decrease, which in turn will decrease the monthly repayments. 
  2. Interest rates on your savings or investments will also change. Banks may offer lower interest rates for saving money.



Why does SARB increase and decrease rates?


The repo rate is set by SARB’s Monetary Policy Committee. The rate changes so that inflation can stay within the 3% to 6% range in line with SARB’s mandate.

Reasons why the interest rates could change


1. Controlling inflation


  •  Inflation is when the prices of goods and services go up over time. 
  • Repo rate changes help to control inflation. 
  • When SARB believes that inflation is too high, it might increase the repo rate with the hopes that it will reduce borrowing and spending in the economy. 

When people borrow less and spend less, it slows down inflation and helps to keep prices lower for everyone.


2.  Stimulating the economy


  •  Repo rate changes can also encourage growth in the economy. 
  • When the repo rate is lowered, it becomes cheaper to borrow money. 
  • ·When we invest and spend more:
  •  companies grow; 
  •  job opportunities are created; and 
  • it the economy is boosted.


Limit credit and maintain a healthy credit score


When the repo rate is increased, you have to do the following:

  • Try not to borrow and use less credit.
  • Pay your bills on time. 
  • Manage your debt responsibly.

A good credit score can help you secure better interest rates in the future. 

Try these 2 useful features on the Money app:

  • My credit score to check your credit score for free. 
  • My Smart Money to help you track your spending.

Types of interest


1. Variable interest rate 

  • Variable interest rates change with the prime rate. 
  • ·When the prime rate is increased, the interest rate on your loans will also change and your repayment amount will increase.


2. Fixed interest rate*

A fixed interest rate is a rate that does not change during an agreed period. 

  • When you borrow money on a fixed interest rate, the rate stays the same throughout this period and your monthly payments stay the same.
  • Fixed interest rates provide stability and protection against potential interest rate changes. They are commonly used in home and car loans, and some investments. 
  • Normally, fixed interest rates are initially higher than variable interest rates.


Remember to be cautious when fixing your interest rate. The best time to choose a fixed interest rate is when interest rates are low, and you believe they will increase.