Rate Cut 2025
Last Thursday, the South African Reserve Bank (SARB) approved a 25-basis point rate reduction, marking another milestone for the residential property sector by lowering the repo and prime lending rates to 7.25% and 10.75%, respectively. This is the fourth rate cut since September 2024.
Rhys Dyer, CEO of the ooba Group, commends the South African Reserve Bank (SARB) for their decision. “The SARB has taken the correct decision to lower rates, which will support consumers and the industry at large, and we have no doubt that this rate cut will make a big impact”.
Key deciding factors
Dyer unpacks a few of the key reasons for the rate cut as follows: “The latest headline consumer price index (CPI) figure for April edged up slightly to 2.8% from 2.7%, but remains below the 3% lower limit of the Reserve Bank’s inflation target range,” he says. “The increase was largely attributed to higher food prices, which were offset by the continued easing of fuel prices, which declined by 13.4% from year-earlier levels (as per StatsSA).”
This is further bolstered by the positive market sentiment following last week’s Budget Speech. “The Budget Speech represented a collective compromise between the parties, signalling a more unified GNU that is committed to working cooperatively,” says Dyer. “One of the key Budget takeaways that will help boost investor confidence in the property sector is the government’s joint commitment to review spending in an effort to stabilise its debt levels.”
What will homeowners be paying now?
As a result of the 25bps rate cut, mortgage repayments will reduce by:
- R750 000 bond – from R7,741 to R7,614 – thus saving R127
- R900 000 bond – from R9,290 to R9,137 – thus saving R153
- R1 000 000 bond – from R10,322 to R10,152 – thus saving R170
- R1 500 000 bond – from R15,483 to R15,228 – thus saving R255
- R2 000 000 bond – from R20,644 to R20,305 – thus saving R339
- R2 500 000 bond – from R25,805 to R25,381 – thus saving R424
- R3 000 000 bond – from R30,966 to R30,457 – thus saving R509
- R5 000 000 bond – from R51,609 to R50,761 – thus saving R848
(Based on a 20-year repayment period at the prime rate)
What does this mean for the property market?
Denese Zaslansky, CEO of the FIRZT Realty group, shares, “There is no time to waste for prospective buyers and investors. At the current average home price of around R1,6m, for example, the gross monthly income required to qualify for a home loan is around R54,200, which is R3,600 less than it was at this time last year.
“But if prices rise by just 5% over the next 12 months, buyers will not only have to face a bigger monthly bond repayment, but will also need to earn about R2 700 more a month to qualify for their home loan – even if the interest rate stays the same. They will thus lose most of the advantage of the recent rate decreases.”