Homeowners urged to budget wisely amid interest rate cuts and debt concerns

Given the ongoing discussions to lower the inflation target, there is a possibility that the recent interest rate cut may be the last one this year. 

If that is the case, Bradd Bendall, BetterBond’s national head of sales, urged homeowners to budget wisely and to be circumspect about taking on additional debt at this time.

“If possible, homeowners with the financial means should maintain their bond repayments at current levels, and not at the new reduced prime lending rate,” Bendall said.

In the Statement of the Monetary Policy Committee (MPC), issued by Lesetja Kganyago, the Governor of the South African Reserve Bank (SARB) on Thursday, the MPC said it now prefers inflation to settle at 3%.

In line with this, they said they have decided to aim for the bottom of their inflation target range, of 3-6%.

“We welcome the recent moderation in inflation expectations and would like to see expectations fall further. This would expand policy space and make our framework more robust to shocks. We will use forecasts with a 3% inflation anchor at future meetings.

"The South African Reserve Bank will also continue working with the National Treasury to complete target reform and achieve permanently low inflation.” 

In its July meeting, the MPC unanimously decided to reduce the policy rate by 25 basis points, to 7%, with effect from August this year.

BetterBond, a mortgage broker, said it would have liked an even greater cut to provide homeowners and consumers with further financial relief. However, it said, given the headwinds being experienced globally with tariff hikes and geopolitical volatility, as well as discussions locally to lower the inflation target, they were grateful for this year's adjustment.

“While we would always welcome a greater reduction, we understand the Reserve Bank is being cautious in the current global environment. This cut is a boost for the market, and we believe it will positively impact buyer confidence and the property sector as a whole, says Hannah Francis, head of marketing at Rainmaker Marketing. 

The global property marketing agency said the rate cut was undoubtedly a positive step for the property market. It said lower interest rates mean better affordability for buyers and reduced financial pressure for property investors.

“It also sends a message of confidence in the economic outlook, which helps boost overall sentiment in the market.”

Francis said this rate cut helps improve affordability, especially in the lower segment of the market,  which could unlock more buyer activity and boost investor confidence. “It supports long-term growth by making property more accessible and attractive, particularly in well-located developments with strong lifestyle offerings,” Francis said. 

The 25 basis point rate cut is going to continue supporting the slow recovery in the residential property market, both from an affordability and consumer confidence point of view, says Herschel Jawitz, CEO of Jawitz Properties.

“The cumulative rate cut of 1.25% since the cycle started means that, on a one-million-rand home loan, monthly repayments have decreased by R840 per month,” Jawitz said.

The property group said homeowners who continue to pay the current payment of the extra R168 per month could reduce their loan period by up to a year and reduce their total repayments by nearly R100 000, depending on how many years they have left on their home loan.

"This may be a viable option for some homeowners, it said. 

Jawitz said this is in addition to reducing the cost of servicing other debt, such as car and credit card repayments.

“For a two-million-rand home loan, the monthly reduction in the repayment is R1 680. Cumulatively, over a year, these amounts will have an impact on disposable income for homeowners and buyers.” 

The CEO said in addition to the financial impact, lower interest rates will continue to have a positive effect on consumer confidence, which is also a key driver of the residential market. Residential property is a long-term investment and relies on buyers feeling more positive about their future financial well-being.

Since the rate-cutting cycle started in 2024, Jawitz said they have seen a recovery in buyer activity and demand for residential property. “This rate cut will continue to sustain this increase in demand, which, over time, will start to firm up property prices-which is good news for sellers.”

The SARB’s move will offer some relief to households facing financial pressure and contribute positively toward improving access to home ownership, says Toni Anderson, the head of Home Services at Standard Bank South Africa.

“Lower borrowing costs can help unlock greater affordability and enable more South Africans to take steps toward securing their own homes. We remain committed to supporting our customers on their home ownership journey and view this decision as a step in the right direction for inclusive and sustainable lending,” Anderson said. 

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