Prime Interest Rate in South Africa

This page shows the current prime interest rate, as well as a graph and table of the prime interest rates in South Africa, since 1948.



The prime interest rate was last updated on . The current prime interest rate is %.

Prime Interest Rate Graph

This is a graph of the prime interest rates in South Africa, since 1948. To see what the prime interest rate was at a specific time, move your mouse over the graph.

Prime Interest Rate History

The following table shows the historical prime interest rates in South Africa, since 1948.

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  1. Zafreen

    hi.

    you have information available on the history of interest rates.
    what about interest rate expectations for the next few years?
    i am looking for interest rate estimates till September 2011.

  2. Francois Viljoen

    @Zafreen

    I answered your question here:

    Interest rate predictions for next two years

  3. Mischa Hofinger

    Dear Francois,

    between 1948 and 1973 the Prime Interest rate remained fairly constant, albeit on a slow upward trend. After 1973 it starts to gyrate. Any expanation? When did SA abandon the Gold Standard?

  4. Francois Viljoen

    @Mischa

    Interesting question.

    South Africa abandoned the gold standard back in 1932, so I don’t think it’s correlated.

    My guess is that a few things came together and caused inflation to increase sharply during the 1970s. This lead to interest rates being hiked, to keep inflation in check.

    Things that may have caused higher inflation for Sough Africa during the 1970s:
    – The US experienced high inflation during the 1970s. I’m not sure if and how inflation in South Africa was correlated with that.
    – During the 1970s South Africa had sanctions imposed against it.
    – In the 1970s black workers were allowed to belong to trade unions for the first time.

    I was only born in ’81 – I was not even alive during the 1970s – so what I listed above is just a guess.

    Anyone with a few more life years who can shed some more light on this?

  5. Colin

    US Dollar – Prime lending rates were kept as low as 1% until the 40’s, then from 1950 to 1970 rose from 2% to 6.75%. In the late 1970s, the US experienced stagflation which was followed with the prime rate peaking at 21.50% in December 1980.

    UK Pound – From 2% in ’49 to over 18% in ’81 – the graph is similar to that of the Rand .
    1949 – 2%
    1950 – 2.07%
    1951 – 2.56%
    1952 – 3%
    1953 – 3.17%
    1954 – 3.05%
    1955 – 3.16%
    1956 – 3.77%
    1957 – 4.2%
    1958 – 3.83%
    1959 – 4.48%
    1960 – 4.82%
    1961 – 4.5%
    1962 – 4.5%
    1963 – 4.5%
    1964 – 4.5%
    1965 – 4.54%
    1966 – 5.63%
    1967 – 5.63%
    1968 – 6.31%
    1969 – 7.95%
    1970 – 7.91%
    1971 – 5.72%
    1972 – 5.25%
    1973 – 8.02%
    1974 – 10.8%
    1975 – 7.86%
    1976 – 6.84%
    1977 – 6.82%
    1978 – 9.06%
    1979 – 12.67%
    1980 – 15.27%
    1981 – 18.87%
    1982 – 14.86%
    1983 – 10.79%
    1984 – 12.04%
    1985 – 9.93%
    1986 – 8.33%
    1987 – 8.2%
    1988 – 9.32%
    1989 – 10.87%
    1990 – 10.01%
    1991 – 8.46%
    1992 – 6.25%
    1993 – 6%
    1994 – 7.14%
    1995 – 8.83%
    1996 – 8.27%
    1997 – 8.44%
    1998 – 8.35%
    1999 – 7.99%
    2000 – 9.23%
    2001 – 6.92%
    2002 – 4.68%
    2003 – 4.12%
    2004 – 4.34%
    2005 – 6.19%
    2006- 7.96%
    2007 -8.05%
    2008 – 5.09%

  6. Robbie Fields

    Francois,

    Thanks for the highly useful graphs.

    How have (term) bank deposits fared over the last 2 decades or so? Have the high rates of interest earned compensated for the debasement of the currency?

  7. Francois Viljoen

    @Robbie

    I haven’t been in the know for long enough to comment on the situation 20 years ago; I can only give an opinion about the last decade.

    Q: Have the interest rates offered by banks, on long-term deposit accounts, over the last 10 years, compensated for inflation?

    A: It depends mainly on two factors: whether you chose the right accounts and the amount of tax you had to pay on the interest you earned.

    If you did your homework before investing your money in a long-term deposit account, and chose the accounts with the lowest bank charges and highest interest rates, then yes, you could have earned an interest rate that at least equalled inflation.

    However, this is a big if. Most term-accounts offered by the big banks in South Africa over the last decade paid interest rates that were, for the lack of a better term, superbly crap, and not worth a second look by the wise investor.

    But there were some some banks that offered good interest rates. They were mostly the smaller, lesser known banks, e.g. ICanOnline, Pick ‘n Pay GoBanking and more recently Capitec.

    The second part of the equation is tax. Interest earned on cash investments are subject to income tax. There is a tax-free bracket, but this is not much (I think currently it is about R18000), but once you earn more interest than this in a year, you have to add it to your taxable income, which greatly reduces your returns.

    Because of these reasons, even though cash should form a part of any balanced portfolio, it is not really attractive to keep most of your investments in interest-earning cash. Your “real” (after-inflation) return on cash is usually negative, or just barely positive.

  8. MARAIS

    How can I calculate a debt amount to date, if the amount was loaned approximately 14 years ago at prime rate and no repayments have been made? I could not find such a useful tool on the net, yet – all the calculators ask me to insert an interest amount.

    Thanks.

  9. Francois Viljoen

    @Marais

    I was in a partnership a few years ago when I had to do a very similar calculation, after one of the partners granted a loan to the partnership, at a prime-linked interest rate.

    You’re absolutely right, most tools on the net will only allow you to do calculations using a fixed interest rate.

    The reason why is that there is no simple way to do such a calculation. The only way is to do many separate calculations.

    You start with the loan amount and interest rate 14 years ago. Then you calculate the amount when the interest rate was changed for the first time after that. Then calculate the amount owing when the interest rate was changed again after that.

    You repeat this process over and over again, until you get to the current date.

    Does this make sense?

    P.S. Remember to take into account the correct interest accrual frequency (i.e. is interest added daily, monthly or yearly) when you do your calculations. The interest accrual frequency can make a HUGE difference to the amount owing over a 14 year period.

  10. Ant Williams

    Hi Francois,

    What is your take on property versus traditional pensions? This may be simplistic, but let me play out a scenario.

    1st I plugged in my age (43) to your retirement calculator, and to realise R20k at age 65 I’d have to contribute R11½k monthly. Let’s assume for some bizarre reason (called Bob) I am only starting my pension contributions at 43! Now R11½K/mth is no mean feat.

    If, instead, I bought a flat for rent – say R300k with a rental income of R3k/mth today. All things being equal I’ll have a couple of years of minor shortfall – less than R1k/mth. If the rent increases annually pegged to inflation (say 10%) and the interest does not go completely mad (let’s say I fix it with my bank), then the rent will outstrip monthly expenses (including agents, repairs, etc. in about years 3-4. Thereafter it is profit generating. If I re-invest those profits AND keep up my monthly contribution of say R1k/mth, the flat will be paid off in less than 8 years. It will be generating an income equal to R3k in today’s value – which if you do the progressions will be R6.4k/mth in 8 years or R20.1k/mth in 20 years.

    So, do the sums. I will have contributed 3½yrs x 12mths x 1k = R42K (ABSOLUTE MAXIMUM) to realise the same pension that the ‘generous’ pension houses ask me to contribute R11½k/mth towards for the rest of my working life, or in other words R3.3mil.

    If I was out in my assumptions by a factor of 10 I would still be 10 times better off!

    One more hidden benefit – the bank would even be lending me the money to do this investment. I’d be interested to see any traditional pension that could compete.

  11. Francois Viljoen

    @Ant

    I’m not a big fan of most traditional pensions and neither am I a big fan of property. But a lot of that is just my preference.

    I think you’ve got some of your estimates and calculations wrong.

    Here are some problems with your estimates / calculations:
    1. Generating R3k a month rental income from a R300k property is not very realistic. You’d be lucky to get half of that, especially if you take into consideration that some months you may be without tentants.
    2. You have not considered general expenses on properties like property tax, maintenance & repairs, management fees and other unplanned fees (e.g. lawyers fees for getting out tenants who don’t pay).
    3. You’re projecting that you’ll earn R20k a month from your property in 20 years time, which is all good and well, but the R20k calculated in the retirement calculator is R20k in TODAY’s terms (i.e. ignoring the effects of inflation). Thus, the rent from your property will only be a fraction of that (probably 5% to 10%).
    4. Please remember to take into consideration that the interest rates in South Africa are currently at the lowest level they’ve been in about 20 years, that inflation is still hovering around 6% (the upper band for SARB) and that it is likely to increase, especially thanks to ESKOM’s ridiculous tariff hikes. There is a VERY GOOD chance that interest rates will be going up over the next few years.

    Other problems with property:
    1. It’s highly illiquid. It takes a lot of time to get rid of it if you need to.
    2. Properties are expensive. I.e. it is difficult to diversify, because most people will only ever own a handful of properties. If you make one mistake and make a bad buy, it can be game over 1-2-3. With shares, there are no such problems. A few thousand rands can buy you a well diversified portfolio.
    3. Again, back to diversification. Because properties are expensive, comparative to most people’s net-worth, by simply owning a house to live in they are already WAY over exposed to property.
    4. Property is not a passive investment. It requires a lot more admin and effort than a pension fund / unit trust / plain old shares.

    I’m not saying that property is a bad investment. Making a killing from property is possible.

    BUT, it will take a lot of hard work, research and dedication.

    The same can be said for most other asset classes – if you do the legwork and the research, and actively keep your finger on the ball, you can do very well.

    The bottom line is that over the long term property doesn’t really outperform a well-balanced share portfolio.

    And if you believe that it really will, then why not rather buy shares in a publicly listed company that owns a lot of property?

    In that way you’ll have a liquid investment that you can convert to cash in a few hours, not have to worry about any of the management or hassles, uncooperative tenants, leaking toilets, etc., and you can invest a much smaller amount, keeping your exposure to property to a reasonable level.

    My advice for most people would be to simply invest in a passively managed index fund (e.g. the SAFRIX RAFI) and forget about active management or getting involved directly.

    If you want to actively manage your investments, then invest in something that you really love and have a passion for and have the time to do it properly.

    If that thing is owning and fixing properties, then there you go. If it is not, then do yourself a favor and stay away.

    All of what I say here comes from personal experience. I’ve been there and tried it.

  12. Helina

    Francois,
    what are the major reasons for interest rate structure movements in South Africa during the past 5 years? I couldn’t find specific explanations or graphs… can you help me out?

  13. Francois Viljoen

    @Helina

    What do you mean by “interest rate structure movements”?

  14. Katlego

    Hello Francois

    I also have a similar question to that of Helina however I would like you to help me understand the main reasons for interest rate movements in South Africa for the past five(5) years,what actually caused them specifically?

  15. Francois Viljoen

    @Katlego

    The short answer is: interest rates are changed to keep inflation at an acceptable level.

    To understand the details, read these three posts:
    1. The South African Reserve Bank (SARB).
    2. What is the Repo Rate?
    3. What is the Prime Interest Rate?

    In them I explain how the prime interest rate is linked to the repo rate, and why the SARB will hike or lower the repo rate.

  16. patrick

    i also have the same question,can you please tell how were the yield curves in SA during the past 5 years and why?

  17. Levy

    Hi Francois,

    I want to buy a house and i’m more worried about the interest rate,if whether i should fix it or link to a repo rate.The thing is that last time an interest rate was 10% or less than that was 1981-01-24.

  18. Francois Viljoen

    @Levy

    Good question.

    Your decision should be based on two things:
    1. the fixed interest rate the bank will offer you, and
    2. the term over which you plan to pay off your mortgage.

    If you plan to pay your mortgage off in a short period of time (say, less than 5 years), it is probably better NOT to fix your mortgage.

    However, if you plan to pay your mortgage off over a longer period of time, it may be better to fix your rate – if the bank offers you a good enough fixed rate.

    I doubt very much if interest rates will go down much more. They may remain low for a while still, but I’m quite sure that we’ve reached the turning point in the interest rate cycle.

    A variable rate means much less risky to the bank, because they will be guaranteed of a profit, regardless of what the repo rate is.

    It’s likely that the bank may also think that interest rates have bottomed out, and therefore, to protect themselves, they may not offer you a very good fixed rate.

  19. Tshepo (30)

    Hi Francois

    Me and my wife have managed to acquire two properties over the past fours mainly through my profesion being achitecture. The first property is currently rented out @ R8000 excl. services and the debt level is @ R298 000. we should have paid off within the next 24 months and it is valued at 1.3 mil worst case. The second recent property is valued at 2.5 mil worst case and currently owing 1.22 mil on it. Have no other investments, is it still good idea to continue playing/ risking in the property market.

  20. vuyisa

    Hi Francois

    im looking at buying a car, my concern is the intrest rate.

    When is it a good time to buy a car, is it when the intrest rate are high or is it when they are low.
    whether is it when the industries sale are doing good/bad

  21. R J Pammenter

    Francois,

    Great website. What is the difference between the prime interest rate and the repo rate for the years 1980 to 2001?

    Thanks,

    Ronnie

  22. Francois Viljoen

    @Ronnie

    I only have repo rate data from 1999-11-25.

  23. Francois Viljoen

    @vuyisa

    In my opinion the best time to buy a car has nothing to do with the interest rate.

    The best time to buy a car is after you have saved up enough money to buy it cash.

  24. Francois Viljoen

    @Tshepo (30)

    Since you are an architect you are probably much more of an expert in the property market than I am, and thus, you should know better than I do whether it is a good idea to continue investing in the property market.

    From what you said in your comment it sounds like you’ve done well so far.

    The only danger is that, since you have no other investments, you’ll be putting all your eggs in one basket. This means you do not have a “diversified” investment portfolio, which means you are vulnerable to changes in the property market.

  25. Kagtho

    Is it advisable to fix the interest rate for the bond for 5 years? or will the rate dropp further than this?

  26. george

    do you think the Australian dollar is far too overheated against the euro,or is it going to grow more in 2011,2012,is the GBP going to stand put or rise in 2011,2012 against the euro or major currencies.
    thank you, george

  27. Nerosha

    Hi, What effect did the 2009 & 2010, drop in the prime interest rate, have on banks in South Africa & the economy?

  28. Cliff

    Hi Francois, can the BA Linked rate only be utilized for bond repayments or can it be used in other applications?

  29. toks

    impress with this data>>>>>>>>>>>>>>keep it up

  30. A Sneyd

    The information on the history tables are outdated. Is there any possiblity for this information to be kept up to date as well?

  31. Francois Viljoen

    What you see here is most recent data available.

    The REPO and prime rates haven’t changed for a long time (since the last date indicated) and the CPI and PPI rates for Feb will only be released at the end of March.

  32. RUDOLF ETSEBETH

    Hi Francois
    Kan jy dalk ‘n gemiddelde primakoers en inflasiekoers lyn op die historiese grafiek inbou? Dit sal interessant wees om te sien wat is SA se historiese gemiddeld vir prima en inflasie.
    Dankie

  33. Jacques

    Is daar ‘n calculator op die web wat SA se rentekoers oor die afgelope tien jaar sal gebruik om vir jou aan te dui hoeveel rente jy verdien het op ‘n belegging in ‘n spaarrekening?

    Jacques Smith

  34. Herman

    Hi,

    What are the chances of the interest rate dropping to less 7% in future?

  35. Khaya Zonke

    Hi Francios

    Is there historical data for retail deposit rates in SA? I’m doing an analysis on funding liquidity risk in the SA banking system and unlike Australia, Canada & UK we seem not to keep data on deposit rates offered to retail clients by banks.

    Please assist.

  36. karl

    Can someone please explain:
    I take out a R1mil bond. The prime rate is 8.5%. What would I pay per month, and why? Please show a calculation.

  37. Nataleigh

    Dear Webmaster

    I just want to say thank-you for a very informative and useful website. I looked everywhere for historical prime rates and found nothing that helped me as far back as I needed to go as EXCEPT yours. Thank-you for your time and effort to bring us this info.

    Kind regards – Nataleigh

  38. Gilad

    Hi,
    Thanks for this. Two things:
    – Would be good if you noted your data sources
    – Could you make the data available downloadable in excel or csv format?
    Thanks again
    Gilad

  39. Gilad

    Hi again,
    So I found the original data source on the SARB statistical query so don’t worry about previous comments (although I would still recommend citing sources).
    Thanks
    Gilad

  40. Francois Viljoen

    Hi Gilad

    All my data is from StatsSA.

  41. Kerry

    Hi Francios

    I am trying to find out what rate I should choose on the purchase of a car, prime 9%, or fixed 10.5% over 5 years. Any advice ?

    Thanks
    Kerry

  42. Francois Viljoen

    @Kerry

    If those were my only two options I would fix the rate at 10.5%.

    But my advice is to choose neither.

    A car is a value depreciating asset. Don’t be an economic zombie. Save up and buy it cash.

  43. Kerry

    Oh gosh, I do not want to be an economic zombie (HAHA), I do have cash but it is invested at a greater rate 15-18% ?

  44. Francois Viljoen

    @Kerry

    If you can earn a guaranteed return of 15-18%, then obviously it’s financially better to leave your cash invested and take the loan.

    If the returns are not guaranteed, e.g. if you’re invested in shares, where a bull-run can give you those returns, but a “correction” can easily result in losses of 50%+ in a single year (like we’ve seen many times, most recently in 2008/2009 and before that in 2000), then I suppose it depends on how you think your investment will perform over the next 5 years.

    Regardless, my advice remains the same.

    A car is a value depreciating asset. If you want one, buy it cash.

  45. Kerry

    Thank you Francois for you valued comments !

  46. SARB hikes interest rates

    […] is the second rate hike this year and takes the REPO rate up to 5.75% and the prime rate up to […]

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