The South African Reserve Bank’s Monetary Policy Committee (MPC) has voted unanimously to cut the repo rate by 25 basis points, bringing it down to 7.00%, with the prime lending rate now at 10.50%.
The latest cut marks the fifth in the current cutting cycle, which has seen rates decrease by a cumulative 125 basis points.
The decision was largely in line with market expectations, with most economists anticipating a modest reduction. However, some had expected rates to be held steady given the added uncertainty around the United States’ upcoming 30% tariff on South African exports, set to take effect from 1 August.
Announcing the decision, Reserve Bank governor Lesetja Kganyago noted that both global and domestic economic conditions remain fragile. The international outlook is clouded by trade tensions, while South Africa continues to struggle with structural challenges – particularly in logistics and infrastructure.
“There are risks that permanently higher tariffs, or adverse geopolitical developments, could cause more disruption to the global economy than we have seen so far this year,” he said.
The MPC acknowledged that recent data suggests a pickup in economic activity in the second quarter. However, overall growth remains weak, and Stats SA’s downward revision of 2024 GDP figures highlights ongoing pressure in the economy.
Business and consumer confidence also deteriorated during the first half of the year, driven by high uncertainty and persistent supply-side constraints.
Inflation has remained relatively subdued, with headline inflation expected to average 3.3% for 2025. While expectations have edged higher, the overall inflation environment remains within the bank’s target range.
Given this context, the MPC deemed a 25 basis point cut appropriate to support growth while keeping inflation expectations anchored.
Home owner relief
The Monetary Policy Committee’s decision is extremely positive news for the residential property market, providing increased confidence and incentive for aspirant home buyers and some relief for those with existing mortgages, said Dr Andrew Golding, chief executive of the Pam Golding Property group.
“As the recovery in first-time buyer demand has stalled, at least temporarily, at 46.4% of applications during H1 2025, this latest interest rate cut – together with last month’s reduction, coupled with a reduced fuel price and the still subdued consumer inflation rate, is expected to support first-time buyer demand in the months ahead as this sector of the market is extremely sensitive to interest rate cuts.
“Importantly, the reduced interest rate will also help boost market sentiment in general,” he said.
With price pressures remaining unexpectedly subdued and inflation expectations relatively steady, there appears to be scope for some additional easing in interest rates without triggering renewed inflation, Golding said.
This would ease financial pressure on households, which are benefiting from lower inflation and a series of petrol price cuts – with another likely in August. However, the general consensus among economists is for no additional cuts in 2025.
“We are already seeing a modest increase in housing market activity, albeit currently more in terms of value rather than volume. Average salary increases are expected at between 5% and 6% this year, making it the second consecutive year in which nominal salary increases have outpaced the average inflation rate. Real (inflation-adjusted) increases in salaries should provide a solid underpinning for consumer spending this year (2025),” said Golding.
Seeff Property Group said that while the rate cuts have been well received, the economy and property market have not yet felt any notable impact from the rate cuts.
The first quarter GDP growth was disappointing. After an initial surge, the overall property transaction volumes for the first half of this year are about 16% below the same time last year.
“Bolder rate cuts are needed. Since the interest rate – even after the latest cut – is still higher compared to January 2020 before the onset of the Covid-pandemic, we continue to urge the Bank to step up with more cuts now while inflation is contained, and the currency stable,” it said.
Bond Repayment Savings After 25bps Rate Cut
(Based on a 20-year loan term at the new 10.50% prime rate)
| Bond Amount | Old Repayment | New Repayment | Monthly Saving |
|---|---|---|---|
| R750,000 | R7,614 | R7,488 | R126 |
| R900,000 | R9,137 | R8,985 | R152 |
| R1,000,000 | R10,152 | R9,984 | R168 |
| R1,500,000 | R15,228 | R14,976 | R252 |
| R2,000,000 | R20,305 | R19,968 | R337 |
| R2,500,000 | R25,381 | R24,960 | R421 |
| R3,000,000 | R30,457 | R29,951 | R506 |
| R5,000,000 | R50,761 | R49,919 | R842 |
