The property industry has welcomed the latest interest rate cut announced by South African Reserve Bank Governor Lesetja Kganyago, viewing it as much-needed relief for consumers – particularly homebuyers and mortgage applicants.
Following the May meeting of the Monetary Policy Committee (MPC), the Reserve Bank lowered the repo rate by 25 basis points to 7.25%, while the prime lending rate now stands at 10.75%.
While modest, the reduction is expected to make mortgage repayments slightly more manageable, providing a welcome reprieve amid ongoing economic strain.
The decision reflects the central bank’s confidence in the current inflation outlook, with consumer inflation remaining below the 3–6% target range — creating space for monetary easing.
Subdued economic growth, low inflation and weaker consumer and business confidence made a compelling case for further interest rate relief, which manifested at this month’s (May) MPC meeting, said Dr Andrew Golding, chief executive of the Pam Golding Property group.
Encouragingly, with inflation remaining below 3% (2.85% in April), the Monetary Policy Committee seized the opportunity to give South Africa’s economy a much-needed boost in sentiment.
“Furthermore, with Inflation surprising on the downside in recent months and, with a petrol price cut likely next month (June) – although partially offset by the 15 cents per litre hike in the fuel levy – price pressures are likely to remain subdued.”
Coupled with this is the fact that local economic recovery was sluggish in the first quarter of the year, with GDP growth forecasts downgraded to around 1.5% for 2025, he said.
In addition, consumer confidence trended downwards, partly due to the proposed 2% VAT hike and general increase in the tax burden in the 05/06 Budget.
Golding noted that the hike in the fuel levy, instead of a VAT hike, is likely to stress already constrained household finances. “Apart from providing some debt relief for consumers in general, a reduction in the interest rate is a positive indicator for sentiment in the housing market, providing encouragement for those with existing mortgages or seeking credit to buy their first home.”
Golding pointed out that analysts arguing for a rate cut ahead of the MPC’s decision noted that at least 15 major central banks have cut interest rates since early-April, when the US administration triggered a wave of turmoil with punitive tariffs hikes which were subsequently temporarily paused.
“Given the weak state of the local economy and the benign inflation rate, the Reserve Bank appears to have followed the lead of these banks.”
The Bureau for Economic Research (BER) has suggested that it is a matter of time before the Reserve Bank introduces a lower inflation target, which will also discourage further interest rate cuts as the Bank attempts to anchor inflation expectations around the new, lower inflation target.
The governor said that the committee considered a scenario with a 3% inflation objective, which corresponds to the low end of our target range. “We will also consider scenarios with a 3% objective at future meetings,” Kganyago said.
While welcoming the rate cut, Samuel Seeff, chairman of the Seeff Property Group, believes it falls short of what the economy urgently needs.
The rate reduction – the fourth since mid-2024 – brings the prime lending rate from 11% to 10.75%.
Although a positive step, Seeff argued that the Reserve Bank missed a crucial opportunity to cut by 50 basis points, which would have offered greater relief to consumers and injected much-needed momentum into the economy and property market.
Seeff said that at this pivotal juncture, there is nothing more critical right now than economic growth and job creation. “Lowering borrowing costs would stimulate business investment and crucially, put more money back into the pockets of consumers, thereby boosting spending.”
“The property market currently still lags the pre-Covid volumes with the first quarter of this year disappointingly some 10% down compared to the same time last year.”
Nonetheless, Seeff said that with continued access to mortgage finance and areas seeing price growth where stock is tightening, there are positive signs for both buyers and sellers.
Rate Cut on Monthly Bond Repayments
(Based on a 20-year loan term at the new prime rate of 10.75%)
| Bond Amount | Previous Repayment | New Repayment | Monthly Saving |
|---|---|---|---|
| R750,000 | R7,741 | R7,614 | R127 |
| R900,000 | R9,290 | R9,137 | R153 |
| R1,000,000 | R10,322 | R10,152 | R170 |
| R1,500,000 | R15,483 | R15,228 | R255 |
| R2,000,000 | R20,644 | R20,305 | R339 |
| R2,500,000 | R25,805 | R25,381 | R424 |
| R3,000,000 | R30,966 | R30,457 | R509 |
| R5,000,000 | R51,609 | R50,761 | R848 |
Seeff said that while the rate cut is welcome, more decisive action will be needed in upcoming MPC meetings to truly unlock economic growth and support South African households.
