Most people know their loan is priced at “Prime plus or minus a percentage”. But what exactly is Prime? Prime is the standard interest rate banks use as a starting point when pricing home loans, car finance and personal loans. Your actual rate is then adjusted up or down from that base, depending on your risk profile.
Prime is linked to the repo rate, the rate set by the South African Reserve Bank (SARB). Since 2001, Prime has been set at 3.5% above repo. This structure allows changes in the Reserve Bank’s policy rate to flow through directly to the rates banks charge and helps keep loan pricing consistent across institutions…to view the full article, please click here.
