The Reserve Bank’s decision to increase the repo rate by 25 basis points to 7.25% (from 7%), raising the prime lending rate to 10.75% (from 10.5%), is another blow to consumers and the struggling economy, says Samuel Seeff, chairman of the Seeff Property Group.
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We had hoped that the Bank would look past short-term spikes and focus on protecting long-term economic stability. The current inflationary spike is driven by temporary factors such as oil prices rather than runaway domestic demand.
The higher interest rate will do little to mitigate external cost shocks but will inflict real financial pain on households and businesses. With national economic growth forecasts already downgraded from 1.4 percent to around 1.1 percent, the higher borrowing costs risk further depressing consumer confidence and spending.
It unnecessarily punishes already overburdened consumers and will dampen economic and property market activity. This rate hike now also effectively wipes out most of the relief gains over the last year, pushing prime to its highest level since May 2025.
Household budgets are already stretched following the May rate hike and other cost increases. Monthly bond repayments will now increase further, risking home loan defaults, and heightening the affordability challenges experienced by first-time buyers.
It will place an unnecessary squeeze on the property market, which is a key driver of economic growth and wealth creation. Seeff says that while the market has remained resilient, the higher than necessary interest rates have meant there has been no real growth over the last three years. National transaction volumes are still about 16 percent below pre-pandemic levels while affordability remains a major challenge.
Despite the headwinds, Seeff says the property market remained resilient. The higher interest rates are temporary, and lending conditions remain fundamentally favourable. Well-positioned buyers who act now can still secure good value and establish a foothold in the market before inflation eases and property prices begin their next upward cycle.
As a result of the 25bps rate hike, mortgage repayments will increase by:
R750 000 bond – from R7,488 to R7,614 – increase of R126
R900 000 bond – from R8,985 to R9,137 – increase of R152
R1 000 000 bond – from R9,984 to R10,152 – increase of R168
R1 500 000 bond – from R14,976 to R15,228 – increase of R252
R2 000 000 bond – from R19,968 to R20,305 – increase of R337
R2 500 000 bond – from R24,960 to R25,381 – increase of R421
R3 000 000 bond – from R29,951 to R30,457 – increase of R506
R5 000 000 bond – from R49,919 to R50,761 – increase of R842
(Based on a 20-year repayment period at the prime rate)
