First interest rate hike in years, but property industry hopes to hold firm – ooba Group

The 28 May 2026 announcement by the Monetary Policy Committee (MPC) to increase the repo rate by 25 basis points to 7%, bringing the prime lending rate to 10.5%, reflects the South African Reserve Bank’s (SARB’s) continued focus on containing inflationary risks amid heightened geopolitical uncertainty and persistent global market volatility, says Rhys Dyer, CEO of the ooba Group.

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The news also marks the first rate increase since May 2023, a decision that is disappointing says Rhys Dyer, CEO of the ooba Group, given the already fragile state of the consumer. “While the increase places additional pressure on already strained consumers, the move was largely anticipated given rising fuel prices, municipal tariff hikes and increased electricity costs, all of which contributed to consumer price inflation (CPI) climbing to 4% in April – up from 3.1% in March.”

He adds that South Africa’s interest rate outlook remains delicately balanced as global geopolitical tensions persist and oil prices remain elevated, clouding the broader economic outlook.

The fragile ceasefire between the US and Iran has done little to calm global markets, with ongoing shipping disruptions and elevated oil prices continuing to place upward pressure on fuel costs worldwide. “Locally, this is likely to translate into further petrol price increases, adding to inflationary concerns and squeezing already constrained household budgets,” he adds.

Consumers under strain – banks step up support

Commenting on consumer affordability, Dyer shares that declining deposit amounts underscore the mounting financial pressures currently faced by South African households. “From January to April, deposits averaged 8.3% of the purchase price for first-time homebuyers and 12.4% overall – a marked improvement from year-earlier levels of 9.9% and 14.9%, respectively. Actual deposit values declined by 14.8% for first-time homebuyers and 16.8% overall.”

This comes against the backdrop of a weakening labour market, with unemployment rising to 32.7% (as per Stats SA). But despite these challenges, Dyer believes that the aspiration of homeownership remains strong among many South Africans – particularly younger homebuyers entering the market for the first time.

“One of the hardest hit by unemployment – the age 15 – 34 bracket – represent a significant portion of future first-time homebuyers. As employment prospects improve over time, many of these individuals will likely look toward homeownership, making financial wellness education and awareness of government support initiatives such as the First Home Finance subsidy increasingly important.”

At the same time, banks are playing a more supportive role. “Financial institutions are increasingly offering more generous finance packages, including zero-deposit bonds and cost-inclusive loans above 100% (and up to 110%),” says Dyer. “Our data shows that repeat homebuyers are increasingly opting for zero-deposit loans, while first-time homebuyers are also making greater use of cost-inclusive loans.”

Looking ahead

Dyer notes that while affordability pressures are likely to intensify following the latest rate increase, property ownership continues to offer meaningful long-term value.

“Even in a constrained economy, homeownership remains one of the most effective ways for consumers to build long-term wealth and financial security. The stability in house price growth, combined with improving access to finance, continues to generate meaningful opportunities for homebuyers.”

Looking ahead to the second half of the year, Dyer says that the SARB will continue to closely monitor the geopolitical issues, and the ongoing impact on local inflation. “While global uncertainty – particularly around the Middle East crisis – is likely to persist, the resilience shown by the local property market, particularly among first-time homebuyers, remains encouraging” he concludes.