Finance

Over R1,100 per month relief expected for homeowners in South Africa

Malcolm Libera

 ·27 Sep 2025

South Africa could see as much as 100 basis points in interest rate cuts over the coming year if inflation continues trending lower and confidence grows that it will remain under control. 

This would mean a cumulative R1,123 per month saving for the average homeowner with a bond by 2027.

According to Old Mutual’s Izak Odendaal, chief investment strategist at Symmetry, this would be a “good” kind of rate cut that reflects falling inflation rather than emergency measures in response to a recession.

“Central banks can lower interest rates for good or bad reasons. A ‘good’ cut would be when inflation is falling or is expected to fall and high interest rates are no longer needed,” said Odendaal.

“This is sometimes characterised as a soft landing since the economy did not buckle under the weight of high interest rates but can now benefit from lower borrowing costs. A ‘bad’ reason is when the economy is headed for recession and in need of emergency support.”

He noted that South Africa’s situation differs from the uncertainty facing the US Federal Reserve, which is grappling with conflicting signals from inflation, employment and politics.

“Closer to home, the South African Reserve Bank does not face the same upheaval and uncertainty,” he said. 

“All members of the Monetary Policy Committee are Reserve Bank staff, which might lead to groupthink, but avoids political drama.”

The Reserve Bank has already shifted its focus to the lower end of its inflation target range, effectively aligning itself with the National Treasury’s plan to formalise a 3% target.

The repo rate is currently at 7%, with two members of the MPC already voting for a cut at the last meeting. “This suggests that the MPC won’t necessarily be dogmatic as it transitions to the lower target,” said Odendaal.

Recent inflation data supports this stance. Consumer inflation slowed to 3.3% year-on-year in August, largely due to lower food prices, while core inflation stood at 3.1%.

Producer inflation was at 1.5% in July and the GDP deflator at 1.4% in the second quarter, both pointing to broad disinflationary pressures. 

Inflation expectations have also shifted meaningfully lower, with survey participants now expecting inflation to average just 4.1% over the next five years, the lowest on record.

“This is important since the Reserve Bank wants people to get used to the idea of lower inflation, such that it starts impacting their behaviour,” Odendaal explained. 

“The more businesses, consumers and workers believe that inflation will be 3%, the more likely inflation is to converge on 3%.”

The Bank’s own models suggest up to 100 basis points in cuts are possible if the data holds, although Odendaal cautioned that this is a guide rather than a promise.

Much will also depend on what the US Federal Reserve does, since aggressive US rate cuts would weaken the dollar and give emerging markets like South Africa more room to ease.

“Some patience will be required, as the transition to structurally lower inflation won’t happen overnight,” said Odendaal. “But when lower interest rates eventually arrive, it will undoubtedly be good for the local economy and local financial market.”

Savings

Data from ooba Home Loans shows that a 100-basis-point reduction translates to monthly savings of R663 on a R1 million bond and R1,325 on a R2 million bond.

The latest oobarometer report highlighted that the average home price in South Africa has climbed to R1,695,257. This means a 1.0% drop in interest rates could bring notable relief to homeowners.

For the average South African home priced at R1.695 million, the monthly repayment decreases by R1,123, 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: