SA's rate cut: a move to boost the economy and property market
Image: SARB/Facebook
The recent interest rate cut sends a strong signal to investors that South Africa is intent on driving economic growth despite global challenges.
On Thursday, South African Reserve Bank governor Lesetja Kganyago announced that the Monetary Policy Committee (MPC) decided to reduce the policy rate by 25 basis points, to 7%, with effect from the 1st of August. He said this decision was unanimous.
South Africa's move is aligned with a cautious global trend toward stimulating consumer spending and investment, says Bradd Bendall, the national head of sales at BetterBond.
"Homeowners will welcome today's decision to drop the prime lending rate to 10.5% - a level last seen in 2022,' Bendall said.
He added that a lower prime lending rate provides much-needed relief to consumers and homeowners struggling to balance their monthly obligations with rising living expenses.
'For the average homeowner with a bond, this reduction could translate to meaningful monthly savings. On a R2 million home, for example, the monthly bond repayments will drop by R337 from R20 305 to R19 968. It will also reduce the amount payable over a 20-year period by R80 876.'
BetterBond said they expect this cut will further invigorate the housing market, which has already shown remarkable signs of recovery in recent months. Its July data shows that bond applications rose by 7.4% for the 12 months to May 2025, with home loans granted up by an impressive 13.6%, the mortgage broker said.
Bendall said these volumes point to renewed buyer confidence and a more stable market environment that should encourage more aspirant first-time buyers to enter the property market.
"The lower interest rate environment will benefit the local property sector going forward as property companies will be able to reduce their average financing costs through the refinance of upcoming debt maturities at lower rates, and the downward rebasing of their ZAR variable debt component's reference rate," says Unathi Hewana, the co-portfolio manager at Mergence Investment Managers.
'The local property market is heavily exposed to retail, so any improvement in consumer sentiment, driven by the lower interest rate environment and the consumer's own ability to better manage their debt financing costs will benefit the sector as well, as that can lead to more retail spend.
"An improvement in general business sentiment, on account of the lower interest rates, should also benefit the property sector, if that improvement in sentiment translates to an increase in demand for space.
"These instances can lead to positive property revaluations and better total return generation as they are supportive of both an increase in rental growth and a decrease in capitalisation rates,' Hewana said.
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Standard Bank said this interest rate cut was expected, given the prevailing low inflation and muted economic growth in the first quarter of this year.
The bank said South Africa's GDP grew by only 0.1% in the first quarter, while inflation remained at the lower end of the SARB's target range, at 3% in June. The odds were tilted in favour of another rate cut, it said. However, the bank said the SARB is now targeting a 3% inflation rate, lower than the previous midpoint of 4.5%.
'This move could reshape the outlook for future interest rate decisions, and some homeowners may now be asking: Should I fix my bond rate now? The answer depends on your financial outlook," says Toni Anderson, the head of Home Services at Standard Bank.
'If you fix your rate now and the SARB starts hiking again, you've shielded yourself from future increases, which can bring much-needed predictability to your monthly expenses,' she explains.
'This could be a smart move if inflation remains sticky or if the target range is lowered, as such developments could affect future interest rate decisions.'
However, she warned that there is also a downside. 'If rates continue to fall or stay low for longer, fixing your rate could mean you end up paying more than you would on a variable rate,' Anderson adds.
'That's why we encourage customers to consider their financial goals, risk tolerance, and how long they plan to stay in their home.'
The head said as the economic outlook remains uncertain, the decision to fix or float should be based on personal risk tolerance and how long one plans to stay in their home.
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