Falling interest rates: how many years you can shave off your home loan?

The Monetary Policy Committee's (MPC) decision to cut interest rates by 25 basis points was widely anticipated. This marks the first rate cut in four years, offering a start to some much-needed relief to households that have struggled with high inflation and steep debt servicing costs over the past two years. As both inflation and debt costs decrease, households will begin to have more disposable income available to them.

A bond worth R1 million will see a savings of R208 per month, or R2,500 per year, following this 25-basis-point rate cut. Standard Bank expects three additional rate cuts of 25 basis points each – one in November and two in the first half of 2025, which could mean even bigger long-term savings. If these expected cuts reduce rates by a total of 100 basis points, homeowners could save R833 per month on a R1 million property in the next year.

Households not facing financial strain can use this opportunity to accelerate their home loan repayments. For example, with a R1 million home loan, maintaining the same repayment amount after 100 basis points interest rates cuts could save homeowners could save R398,237 in interest and reduce their loan term by four years.

Below are calculations of potential savings in interest for homeowners in different property brackets if they keep their monthly repayments unchanged*.

* The calculations below are illustrative and don’t factor any future interest rate changes.