Another 25bps interest rate cut boosts confidence for aspiring home buyers

The South African Reserve Bank’s Monetary Policy Committee’s decision to reduce the repo rate by a further 25bps increased confidence and incentive for aspirant home buyers. 

It also brings some relief for those with existing mortgages, says Dr Andrew Golding, chief executive of the Pam Golding Property group.

With the SA Reserve Bank repo rate reducing to 7.0%, the prime lending rate drops to 10.5%, said  Golding.

“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,”  Golding said. 

Furthermore, he said the pricing of home loans continues to grow more competitive, with the average concession relative to the prime rate improving across all regions in the second quarter of this year relative to year-earlier levels.

"The average deposit for first-time buyers also eased to 10% of the purchase price in H1 2025, compared to 10.9% during the first half of 2024, providing further encouragement for this sector of the market," he said. 

The Reserve Bank decision to cut the repo rate by another 25bps is welcome news for the economy and property market, says Samuel Seeff, chairman of the Seeff Property Group. He said this is the third interest rate cut this year (fifth since September last year).

Seeff says it is the correct decision given that inflation (at 3% for May) is below the Bank’s target range, and the currency has been stable, trading at times below R18/USD.  

“While this cut brings welcome relief for consumers by reducing borrowing costs and putting more money back into their pockets to spend in the economy, it is still not enough. More needs to be done to really give the economy the rocket boost that it needs,” Seeff said.   

Nonetheless, the property group said the rate cut will make home loans more affordable and property buyers will find it slightly easier to qualify, thus opening more doors to homeownership.

“The total rate cuts since September mean that the interest rate will now be 1.25% lower compared to last year. The repayment on a bond of R1 million (over 20 years) will therefore now be reduced by around R853 per month.

"We would therefore certainly encourage buyers to take advantage of the opportunities in the market.” 

He said the higher demand and improved house price appreciation at around 3.7% nationally (topping inflation for the first time in two years) also provide an incentive for sellers, especially since many areas require more property listings.  

While the rate cuts have been well received, Seeff says the economy and property market have not yet felt any notable impact from the rate cuts. He added that 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)”  

Now at 7% and 10.50% respectively, borrowing costs are officially 1.25% lower than they were a year ago, a welcome result according to Rhys Dyer, CEO of the ooba Group, who believes this will continue to support homebuyers and homebuying activity.

“At the current prime lending rate of 10.50%, the monthly repayment on a home priced at our Q2 ‘25 average approved bond size of R1,455,712 equates to R14,534 over 20 years - down from R15,776 just a year ago.

"Savings like these add up to almost R15,000 extra in a homeowner’s pocket over the course of a year,” Dyer said.

He added that consumers’ improved affordability is reflected in ooba Home Loans’ latest figures. “In Q2 ’25 we saw an 11% year-on-year increase in home loan applications and an 18.5% increase in the total value of these applications,” he shares.

“This points to ongoing market recovery, increased buying power and growing buyer confidence.”

Interestingly, though, deposits-a key indicator of consumer liquidity-have drifted lower, down by 13.5% year-on-year for the average homebuyer and 1.9% for first-time homebuyers (as at Q2 2025).

“We do however, believe that these figures are reinforced by strong bank lending activity, including attractive incentives like zero-deposit loans and some of the highest discounts to the prime lending rate seen in years,” says Dyer, highlighting an average interest rate of prime less 0.67% for its customers in Q2 ‘25 – a 0.11% reduction year-on-year.

“This cut is likely to serve as a much-needed catalyst for transaction volumes, particularly in the affordable and mid-market sectors. The market is still price-sensitive, but this rate cut could re-energise interest in property acquisitions,” says Adrian Goslett, regional director and CEO of REMAX Southern Africa.

“While this 0.25% cut may seem modest, it does mark a positive step toward restoring the rate environment we saw before the pandemic. Back in January 2020, the repo rate stood at around 6.5%, and although we’re still well above that, today’s decision brings us incrementally closer.

"It’s an encouraging signal that the Reserve Bank may be pivoting towards a more growth-friendly stance, which could help unlock pent-up demand in the housing market,” says Goslett.

Despite broader economic challenges, the housing market has retained a degree of buoyancy. House prices have strengthened, and sales volumes continue to surpass expectations, especially within the REMAX SA network.

"REMAX Southern Africa reports that its registered sales figures have increased by 12.5% compared to last year (as at the end of June), and their total units sold increased by 6.5%. 

“I remain optimistic about how this latest interest rate cut will impact the local housing market and expect to see activity strengthen further in the months to follow,” Goslett said.  

∎ Source for some of the comments: ooba Home Loans.

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