{"id":836927,"date":"2025-09-11T13:05:37","date_gmt":"2025-09-11T11:05:37","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=836927"},"modified":"2025-09-11T13:05:42","modified_gmt":"2025-09-11T11:05:42","slug":"bad-news-for-south-africans-paying-off-their-homes-and-cars","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/836927\/bad-news-for-south-africans-paying-off-their-homes-and-cars\/","title":{"rendered":"Bad news for South Africans paying off their homes and cars"},"content":{"rendered":"\n

Absa\u2019s senior economist has warned that any meaningful interest rate cuts are unlikely before 2027.<\/p>\n\n\n\n

For households paying off homes, cars and other debt, this means that financial pressure will continue for the next year or so.<\/p>\n\n\n\n

Absa senior economist Miyelani Maluleke said during a webinar on the bank\u2019s quarterly economic outlook that the Reserve Bank is unlikely to lower rates again in the short term.<\/p>\n\n\n\n

\u201cOur baseline view is that it will be a little difficult for the SARB to deliver interest rate cuts in the near term,\u201d he explained<\/a>. <\/p>\n\n\n\n

While inflation dropped to 3% in July, Absa\u2019s forecasts show it will remain sticky, averaging 3.9% in 2026 and 3.5% in 2027. This is higher than the Reserve Bank\u2019s own projection of 3.3% for 2025 and 2026, and 3% in 2027.<\/p>\n\n\n\n

The Reserve Bank has also noted that it wanted to formally adopting 3% as its new inflation anchor, the bottom of its existing 3% to 6% target range.<\/p>\n\n\n\n

Maluleke said Absa welcomed the shift, and noted that the SARB\u2019s decision to move the inflation anchor from 4.5 to 3% will help in the long run to reduce expectations of inflation.<\/p>\n\n\n\n

However, he cautioned that the central bank\u2019s timeline is too optimistic. \u201cInflation is going to remain sticky and higher than the SARB expects,\u201d he said.<\/p>\n\n\n\n

This outlook dims prospects for rate cuts, even though the repo rate currently stands at 7% after the Monetary Policy Committee reduced it by 25 basis points in July. <\/p>\n\n\n\n

It also runs counter to other views that a 25 basis point cut could be coming in September or November<\/strong><\/a>, with room for more in 2026 and 2027.<\/p>\n\n\n\n

Banks\u2019 prime lending rate is now 10.5%, which still leaves South Africans with expensive loans and mortgages. Absa economists expect only gradual relief, pencilling in cuts of 50 basis points in 2027 and another 50 in 2028.<\/p>\n\n\n\n

The bank also trimmed its GDP growth forecasts, cutting 2025 growth to just 0.9%, with an average of 1.6% in 2026 and 2.1% between 2027 and 2029. <\/p>\n\n\n\n

With weak growth and little policy space, households will continue to carry the burden of high debt costs.<\/p>\n\n\n\n

Interest rates should be 3.5% lower than they are now <\/h2>\n\n\n
\n
\"\"<\/a>
Economist, Dr Roelof Botha.<\/em><\/figcaption><\/figure><\/div>\n\n\n

Economist Roelof Botha is highly critical<\/a> of the central bank\u2019s stance, and argued that the focus on driving inflation down to 3% is misguided. <\/p>\n\n\n\n

\u201cThe thought that they now want to change the target range for inflation from 3% to 6% to a point of 3% is so ridiculous it defies comprehension,\u201d he said. <\/p>\n\n\n\n

He believes inflation in South Africa will always be structurally higher than in developed markets. <\/p>\n\n\n\n

\u201cWe are far from major consumer markets, which means it\u2019s always going to be more expensive for us to get goods into and out of the country. We will always have that extra 1 to 3% inflation on top of exchange rate volatility.\u201d<\/p>\n\n\n\n

Botha added that much of the inflation South Africa has faced in recent years was driven by shocks no central bank could control. <\/p>\n\n\n\n

\u201cGlobal freight shipping rates increased by 700% immediately after Covid, and oil prices rose by 400% due to Russia\u2019s invasion of Ukraine,\u201d he said. <\/p>\n\n\n\n

\u201cWhen these things happen, there is no central bank in the world that can shield itself against such events. You cannot shield yourself from cost-push inflation.\u201d<\/p>\n\n\n\n

He argued that the Reserve Bank\u2019s restrictive stance has made life harder for South Africans and worsened unemployment. <\/p>\n\n\n\n

\u201cIt was never necessary for the Monetary Policy Committee to take interest rates to a 15-year high when there was no demand inflation in the economy. In the process, they aggravated unemployment in South Africa \u2013 and that is a fact.\u201d<\/p>\n\n\n\n

The Altron Fintech Household Resilience Index, showed a 2.5% real increase year-on-year in household resilience, five times higher than GDP growth. <\/p>\n\n\n\n

However, Botha warned that this improvement was due in part to households dipping into retirement savings through the new two-pot system, which may not be sustainable.<\/p>\n\n\n\n

Botha also criticised the real prime lending rate, saying it has more than doubled compared to the period when Gill Marcus was governor. <\/p>\n\n\n\n

\u201cDuring the tenure of the previous governor, Gill Marcus, the average real prime rate was 3.4%. Today our real prime rate is more than double that.\u201d<\/p>\n\n\n\n

\u201cIt is incomprehensible that a country like ours can experience such a dramatic shift in monetary policy priorities in an environment where economic growth and employment creation should be paramount.\u201d<\/p>\n\n\n\n

\u201cWith inflation currently at 3%, I would like the real prime rate to be at 4%. That gives you a 7% prime rate. If I had been the governor of the Reserve Bank, the prime rate of this country would have been 7%,\u201d he said.<\/p>\n\n\n\n

He believes growth and job creation should trump narrow inflation targets, even if inflation drifts up to 5% or 6%.<\/p>\n","protected":false},"excerpt":{"rendered":"

Absa\u2019s senior economist has warned that any meaningful interest rate cuts are unlikely before 2027.<\/p>\n","protected":false},"author":92,"featured_media":807434,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[29,23545,2922,21912],"class_list":["post-836927","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-absa","tag-altron-fintech-household-resilience-index","tag-interest-rates","tag-the-south-african-reserve-bank-sarb"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/836927","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/92"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=836927"}],"version-history":[{"count":2,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/836927\/revisions"}],"predecessor-version":[{"id":837378,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/836927\/revisions\/837378"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/807434"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=836927"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=836927"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=836927"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}