The South African Reserve Bank (SARB) has reduced the repo rate by 25 basis points, which provides some additional financial relief for homeowners and prospective buyers.
This decision, announced after the Monetary Policy Committee (MPC) meeting, brings the repo rate down to 7.25% and the prime lending rate to 10.75%.
As anticipated by economist polls and analyses ahead of the meeting, the decision was not unanimous, but surprisingly, none of the members voted to hold
Five members voted for a 25-basis-point cut, and one voted for an even bigger 50-basis-point cut.
While official GDP data for the first quarter are not yet available, SARB Governor Lesetja Kganyago said indicators for sectors like mining and manufacturing have been disappointing.
Unemployment has also risen. GDP projections have been cut to only 1.2% in 2025, rising to 1.8% in 2026.
Inflation has been tracking below the Reserve Bank’s target range, driven predominantly by lower fuel costs. As a result, average inflation expectations for the year have been pulled lower.
This also reflects the removal of a VAT hike from the picture, which was included as a risk factor in the bank’s last calculations. Given this backdrop, the bank opted to cut rates, bringing some relief to consumers.
The decision to cut rates has stirred optimism across the property sector. However, some have said that more is needed.
Samuel Seeff, chairman of the Seeff Property Group, said the 25bps cut is welcome, but the economy needs more.
This is the fourth rate cut by the Reserve Bank since the latter half of last year. It reduces the repo rate to 7.25% (from 7.50%) and the prime rate to 10.75% (from 11%).
Seeff believes the Bank missed a crucial opportunity to provide a more meaningful cut of at least 50bps, which would have provided a vital boost for the economy, consumers, and the property market.
Tyson Properties director Francois du Toit is more cautious than Seeff, highlighting that the announcement was reasonable considering the incoming fuel tax hike.
He said that inflation is currently below the target range midpoint, but the recent fuel levy hike may increase the cost of essential goods and household expenses.
“Economic headwinds are expected to continue, limiting the potential for interest rate cuts in the near future,” he added.
“The current interest rate scenario is where our new norm will lie. It might go down a little bit or up a little, but I think people must budget according to where interest rates are right now.”
Andrew Golding, chief executive of the Pam Golding Property group, added that the 25bps cut is a positive sign for the property market.
A reduction in interest rates offers some debt relief for consumers and is a positive sign for sentiment in the housing market,” he said.
“This cut will encourage both those with existing mortgages and first-time homebuyers to seek credit.”
Some have also recommended that borrowers use the savings from lower interest rates to accelerate their bond repayments.
By maintaining higher monthly payments, homeowners can reduce their loan terms and save significantly on interest costs over time.
Savings
While some property experts called for a steeper cut, the 25bps provides tangible relief of at least R145 at the lower end.
Data from ooba Home Loans shows that a 25-basis-point reduction translates to monthly savings of R170 on a R1 million bond and R339 on a R2 million bond.
The latest oobarometer report highlighted that the average home price in South Africa has climbed to R1,661,519. This means a 0.25% drop in interest rates could bring notable relief to homeowners.
For the average South African home priced at R1.66 million, the monthly repayment decreases by R282, providing much-needed relief to households.
While uncertainties remain, the combination of lower rates, easing inflation, and renewed confidence will benefit the property market and prospective buyers.
The savings on bonds for property prices between R850,000 and R5 million can be found below:
| Bond value | March 2025 (11.00%) | May 2025 (10.75%) | Saving |
|---|---|---|---|
| R850,000 | R8,774 | R8,629 | R145 |
| R1,000,000 | R10,322 | R10,152 | R170 |
| R1,500,000 | R15,483 | R15,228 | R255 |
| R1,661,519 | R17,150 | R16,868 | R282 |
| R2,000,000 | R20,644 | R20,305 | R339 |
| R2,500,000 | R25,805 | R25,381 | R424 |
| R3,000,000 | R30,966 | R30,457 | R509 |
| R3,500,000 | R36,127 | R35,533 | R594 |
| R4,000,000 | R41,287 | R40,609 | R678 |
| R4,500,000 | R46,448 | R45,685 | R763 |
| R5,000,000 | R51,609 | R50,761 | R848 |
