The Reserve Bank’s decision to leave the interest rate unchanged comes as no surprise. The ongoing realignment of interest rate policy is expected to support renewed confidence in the sector, says Chris Tyson, founder CEO of national property group, Tyson Properties. It does in no way detract from the very positive indicators for the property market during 2026.
Although many economists predicted that the Reserve Bank Monetary Policy Committee (MPC) would err on the side of caution. Tyson expects another cut in the benchmark repo rate by 25 basis points. They expected it to start the year without many major change. This would move it from 6.75% to 6,5% and could come as early as March.
It hinges on the continued strong performance of the rand. This will follow a 25-basis-point reduction in November 2025. This is on the back of a weakening dollar due to global political uncertainties. It is also supported by the continued record levels achieved by the gold price.
Realignment of Interest Rate and the Home Loan System
“Right now we are entering an extremely interesting time for the property sector. It suggests a realignment of the whole home loan system this year. The Reserve Bank’s announcement in Davos indicates that it is looking into scrapping or restructuring the prime lending rate. This is aimed at modernizing the financial system.
When applying for a home loan, clients are offered a rate that centres on the prime rate. The prime rate – which is 10.25% – is the benchmark for the rate that banks offer clients. This is then adjusted depending on the cost of funding, risk appetite and creditworthiness.
This comes at a time when there is evidence of greater demand for home loans. Tyson says that this move will increase competition for loans between lenders. There is also greater enthusiasm on the part of financial institutions to lend. It will see banks offering more market related options to potential clients.
It will rather give credit worthy clients more bargaining power from the outset. However, he believes that, in itself, scrapping the prime rate will not materially impact the cost of debt.
Inflation Target and Market Revival
It will also be reflected in further interest rate cuts throughout the rest of the year. What is potentially more significant is how the Reserve Bank’s new 3% inflation goal beds down.
“It will give both existing and new homeowners a little relief. It is this that will revive the market. This explains the pause in interest rate cuts this month. Towards the end of last year, inflation edged above the Reserve Bank’s 3% new target. But inflation is expected to level off during the latter half of 2026. This is expected to spark further cuts.
They may upgrade their properties. This will not only tempt first time home buyers into the market. They may even move to other parts of the country in pursuit of better lifestyles. It will also give existing property owners a strong basis for deciding to downsize,” he says.
