What scrapping the prime rate means for consumers

The South African Reserve Bank (SARB) has invited all stakeholders to comment on its proposal to discontinue the prime lending rate. It wants commercial banks to negotiate the pricing of car and home loans on the SARB policy rate, commonly known as the repurchase (repo) rate.

CapeTalk's Lester Kiewit asked the CEO and Founder of Future Forex, Harry Scherzer, what benefit this has for consumers.

"It doesn't actually mean anything for homeowners and vehicle owners who are doing it on finance because really all it is, is a difference in reference," says Scherzer.

He explained that the prime rate is 10.25% and the repo rate is 6.75%, which is 3.5% below that.

"So, really, all this is doing is creating more transparency, where it's showing the real margin of the bank when loaning funds to you.

Scherzer supports the change.

"It's only going to come in 2027 at the earliest, but I think it's a brilliant change because I've always been pro-transparency to the consumer, and it very much puts the banks' margins front and centre. It shows consumers that, actually, banks are making a decent amount every time they give them vehicle financing or home loan financing.

"It becomes clearer that actually they aren't making small margins; 0.5%, 1%; they're actually making 3%, 3.5%,4%. I think it is ultimately good in an information age. We need to be sharing that with consumers.

"And yes, the negative offset is that, as a result, it might cause people to be more wary before taking a loan, which, for the economy, isn't such a good thing because loaning is what fuels the economy.

It increases spend and that's good for the GDP of the country and good for growth, so that's one of the pushbacks. And probably the reason that the prime rate's been used as long as it has. But overall, I favour transparency and really treating customers fairly more than I do fuelling growth through not giving consumers the full picture."

He says this may ensure that banks need to be more competitive and 'sharpen their pencils a bit'.

All comments, suggestions and general queries relating to this proposal contained in a consultation paper on the SARB's website should be sent by 20 March 2026 to sarbwgrirb@resbank.co.za.