Rate Cuts Save Homeowners Thousands Per Year as Housing Demand Rebounds in 2025
– Rhys Dyer, CEO of the ooba Group
Today’s announcement by the South African Reserve Bank (SARB) sees the repo and prime lending rates cut by 25-basis points for a second consecutive time.
Now at 7% and 10.50% respectively, borrowing costs are officially 1.25% lower than they were a year ago – a welcomed result that Rhys Dyer, CEO of the ooba Group, believes will continue to support homebuyers and homebuying activity.
“At the current prime lending rate of 10.50%, the monthly repayment on a home priced at our Q2 ‘25 average approved bond size of R1,455,712 equates to R14,534 over 20 years – down from R15,776 just a year ago. Savings like these add up to almost R15,000 extra in a homeowner’s pocket over the course of a year.”
Dyer adds that consumers’ improved affordability is reflected in ooba Home Loans’ latest figures. “In Q2 ’25 we saw an 11% year-on-year increase in home loan applications and a 18.5% increase in the total value of these applications,” he shares. “This points to ongoing market recovery, increased buying power and growing buyer confidence.”
Interestingly though, deposits – a key indicator of consumer liquidity – have drifted lower, down by 13.5% year-on-year for the average homebuyer and 1.9% for first-time homebuyers (as at Q2 ‘25).
“We do however believe that these figures are reinforced by strong bank lending activity, including attractive incentives like zero-deposit loans and some of the highest discounts to the prime lending rate seen in years,” says Dyer, highlighting an average interest rate of prime less 0.67% for its customers in Q2 ‘25 – a 0.11% reduction year-on-year.
Economic Outlook in Support of Further Potential Rate Cuts
While the country has five rate cuts under its belt since September 2024, Dyer believes that there is still scope for a further reduction.
“Today’s news is certainly welcomed by the residential property sector,” he says. “As it stands, South Africa’s economic outlook provides room for monetary easing. Inflation remains anchored at the lowest levels seen in four years (currently 3%) and the country has benefitted from a series of petrol price cuts, with another anticipated in August.”
And despite global uncertainty, Dyer believes that the demand for homes will build in light of today’s news and the prospect of a stable, lower interest rate environment. “The market has responded positively this year – even in the face of trade policy volatility – and we expect this to continue.”
Fuelling the positive momentum is news of a second consecutive year of real salary growth, with increases of 5% to 6% outpacing last year’s inflation rate of 4.4% and the projected 3.5% for this year. “This is reflected not only in the higher value of home loan applications in Q2 ‘25, but also in our January – June 2025 salary data, which shows year-on-year growth in excess of inflation in average monthly gross income across four of the nine regional housing markets.”
Will Rate Cuts Further Entice First-Time Homebuyers?
Fuelled by recent rate cuts, first-time homebuyers are making a cautious but steady return to the market.
“While this segment has only experienced marginal year-on-year growth in Q2 ‘25 – up just 1% to 46% – they’re spending 3.5% more on homes year-on-year,” shares Dyer.
Notably, first-time homebuyers appear to be more financially prepared than in the past. “In Q2 ‘25, the average deposit rose to 10.4%, a significant increase compared to Q2 ‘20 at 8.45%. This indicates that they are prioritising savings and are actively taking steps to pay down their home loans.”
For those struggling to save, the good news is that the banks are stepping in. “In Q2 ‘25, 59% of first-time homebuyers secured a home without a deposit, while 10.5% purchased a home without a deposit or access to funds for transfer and bond costs,” says Dyer.
Reflecting on whether this group could return to their May 2020 peak, Dyer remains measured. “That surge was driven by a record-low 7% interest rate – a level that we’re unlikely to see again anytime soon. Still, the banks remain committed to supporting first-time homebuyers and we expect their presence in the market to continue strengthening” he concludes.
Repo rate cut expected to stimulate housing market
– Dr Andrew Golding, chief executive of the Pam Golding Property group
The Monetary Policy Committee’s decision to reduce the repo rate by a further 25bps is extremely positive news for the residential property market, providing increased confidence and incentive for aspirant home buyers and some relief for those with existing mortgages, says Dr Andrew Golding, chief executive of the Pam Golding Property group.
With the SA Reserve Bank repo rate reducing to 7.0%, the prime lending rate drops to 10.5%.
Says Dr Golding: “As the recovery in first-time buyer demand has stalled, at least temporarily, at 46.4% of applications during H1 2025 (source: ooba Home Loans), this latest interest rate cut – together with last month’s reduction, coupled with a reduced fuel price and the still subdued consumer inflation rate, is expected to support first-time buyer demand in the months ahead as this sector of the market is extremely sensitive to interest rate cuts. Importantly, the reduced interest rate will also help boost market sentiment in general.
Furthermore, the pricing of home loans continues to grow more competitive, with the average concession relative to the prime rate improving across all regions in Q2 2025 relative to year-earlier levels (source: ooba Home Loans). The average deposit for first-time buyers also eased to 10% of purchase price in H1 2025, compared to 10.9% during H1 2024, providing further encouragement for this sector of the market.
Inflation outlook
Earlier this month (July), the Reserve Bank Governor indicated that the Bank is confident that inflation will remain within its 3%-6% target range for the next 24 months, despite uncertainty caused by ongoing US trade negotiations.
Inflation has repeatedly surprised on the downside in recent months and has remained anchored at or near the 3% lower limit of the inflation target, while the outlook remains relatively balanced, thereby creating space for the MPC to respond to the still muted levels of economic activity by cutting interest rates once more.
The weakness in the SA economy was highlighted by the recent release of the Reserve Bank’s index of leading business economic indicators, which, primarily due to the unprecedented economic uncertainty fuelled by the US trade tariffs, has now fallen back into negative territory, reflecting that the H2 2024 recovery in local economic activity has dissipated.
With price pressures remaining unexpectedly subdued and inflation expectations relatively steady, there appears to be scope for some additional easing in interest rates without triggering renewed inflation. This would ease financial pressure on households, which are benefiting from lower inflation and a series of petrol price cuts – with another likely in August.
We are already seeing a modest increase in housing market activity, albeit currently more in terms of value rather than volume. Average salary increases are expected at between 5% and 6% this year, making it the second consecutive year in which nominal salary increases have outpaced the average inflation rate. Real (inflation-adjusted) increases in salaries should provide a solid underpinning for consumer spending this year (2025).”
Rate cut a welcome boost for consumers and homeownership
– Samuel Seeff, chairman of the Seeff Property Group
Today’s announcement that the Reserve Bank has decided to cut the repo rate by another 25bps to 7.00% (from 7.25%), and the prime rate to 10.50% (from 10.75% ) is welcome news for the economy and property market, says Samuel Seeff, chairman of the Seeff Property Group.
This is the third interest rate cut this year (fifth since September last year). Seeff says it is the correct decision given that inflation (at 3% for May) is below the Bank’s target range, and the currency has been stable, trading at times below R18/USD.
While this cut brings welcome relief for consumers by reducing borrowing costs and putting more money back into their pockets to spend in the economy, Seeff says it is still not enough. More needs to be done to really give the economy the rocket boost that it needs.
Nonetheless, the rate cut will make home loans will more affordable and property buyers will find it slightly easier to qualify, thus opening more doors to homeownership. The total rate cuts since September means that the interest rate will now be 1.25% lower compared to last year. The repayment on a bond of R1 million (over 20-years) will therefore now be reduced by around R853 per month.
We would therefore certainly encourage buyers to take advantage of the opportunities in the market, Seeff says further. Higher demand and improved house price appreciation at around 3.7% nationally (topping inflation for the first time in two years) also provides incentive for sellers, especially since many areas are in need of more property listings.
While the rate cuts have been well received, Seeff says the economy and property market have not yet felt any notable impact from the rate cuts. The first quarter GDP growth was disappointing. After an initial surge, the overall property transaction volumes for the first half of this year are about 16% below the same time last year.
Bolder rate cuts are needed. Since the interest rate (even after the latest cut) is still higher compared to January 2020 before the onset of the Covid-pandemic, we continue to urge the Bank to step up with more cuts now while inflation is contained, and the currency stable.
As a result of the 25bps rate cut, mortgage repayments will reduce by:
R750 000 bond – from R7,614 to R7,488 – saving R126
R900 000 bond – from R9,137 to R8,985 – saving R152
R1 000 000 bond – from R10,152 to R9,984 – saving R168
R1 500 000 bond – from R15,228 to R14,976 – saving R252
R2 000 000 bond – from R20,305 to R19,968 – saving R337
R2 500 000 bond – from R25,381 to R24,960 – saving R421
R3 000 000 bond – from R30,457 to R29,951 – saving R506
R5 000 000 bond – from R50,761 to R49,919 – saving R842
(Based on a 20-year repayment period at the prime rate)
Repo rate drops 25 basis points
– Bradd Bendall, BetterBond’s National Head of Sales
Homeowners will welcome today’s decision to drop the prime lending rate to 10.5% — a level last seen in 2022. This cut sends a strong signal to investors that the country is intent on driving economic growth despite global challenges. South Africa’s move is aligned with a cautious global trend toward stimulating consumer spending and investment.
A lower prime lending rate provides much-needed relief to consumers and homeowners struggling to balance their monthly obligations with rising living expenses. For the average homeowner with a bond, this reduction could translate to meaningful monthly savings. On a R2 million home, by example, the monthly bond repayments will drop by R337 from R20 305 to R19 968. It will also reduce the amount payable over a 20-year period by R80 876.
We expect this cut will further invigorate the housing market, which has already shown remarkable signs of recovery in recent months. BetterBond’s July data shows that bond applications rose by 7.4% for the 12 months to May 2025, with home loans granted up by an impressive 13.6%.
These volumes point to renewed buyer confidence and a more stable market environment that should encourage more aspirant first-time buyers to enter the property market.
Commentary in Afrikaans
Die Reserwebank het die repo-koers met 25 basispunte verlaag, wat die prime leningskoers op 10.5% bring — ‘n vlak wat laas in 2022 gesien is. Vir huiseienaars beteken die laer koers ‘n welkome verligting op hul maandelikse verbandbetalings. Die behuisingsmark het reeds sterk tekens van herstel getoon. BetterBond se nuutste data onthul ‘n 7.4% styging in verband aansoeke oor die afgelope jaar, met huise lenings wat met 13.6% toegeneem het. ‘n Laer prime leningskoers, tesame met hernude kopervertroue, kan meer eerste keer kopers aanmoedig om die eiendommark binne te gaan.
