Homeowners advised to budget wisely ahead of September interest rate decision

Given the current local and global economic uncertainties, homeowners are urged to budget wisely and avoid unnecessary credit, regardless of the outcome of Thursday’s meeting.

Those who can, should pay extra into their bond-even if the prime lending rate drops-to serve as a buffer against future rate changes,  says Bradd Bendall, the national head of sales at BetterBond. 

The SARB will on Thursday release its Monetary Policy Committee (MPC) statement, following the meeting of the MPC.

 At the end of July, the MPC decided to reduce the policy rate by 25 basis points, to 7%, with effect from the beginning of August. The July decision was unanimous.

Although the property market has shown remarkable resilience in recent months, notwithstanding global and local economic headwinds, a lower prime lending rate would certainly have stimulated further loan activity and perhaps increased house price inflation, Bendall says.

"Lower rates would also encourage more first-time buyers to enter the market."

Lower interest rates impact

While lower rates may have boosted property purchases and development projects, the trade-off would have been a much higher cost of living, lost purchasing power and growing discontent amongst a population that was already reeling from mass job losses and income during the pandemic.

This is according to Dr Farai Nyika, an academic programme leader at the Management College of Southern Africa's School of Public Administration (Mancosa).

He says if the SARB had kept rates at COVID levels since the end of the pandemic, then South Africa would have experienced much higher inflation, and the rand would have weakened more than what occurred.

"The reason is that the Covid-induced demand destruction ended when lockdowns lifted, and global supply chains took time to adjust; both these forces had inflationary effects." 

The academic says it should be borne in mind that the primary purpose of the SARB is to protect the value of the rand. Thus, he says the actions taken in raising rates post-pandemic and subsequently cutting them were conventional, followed best practice as seen in the EU and the US.

Property market showing resilience

BetterBond says the property market is seeing encouraging signs of a housing market in recovery, notwithstanding global tariff tensions and local inflationary pressures.

The bond originator says a sharp uptick in home loan applications, up 11% quarter-on-quarter and 14% year-on-year according to the latest BetterBond Property Brief (September 2025), marks the strongest demand seen since 2022.

"The five prime lending rate cuts since September 2024 have done enough to ensure the market is robust enough to withstand possible interest rate fluctuations in the next few months."

It added that it is important to look at the positive indicators, which are:

• House prices are also strengthening, up 2.1% year-on-year, with the average purchase price for first-time buyers reaching a record R1.3 million in July and August. 
• Deposit requirements have also eased, dropping 5% year-on-year according to BetterBond’s latest data. 

What will happen if SARB drops, maintains or hikes the repo rate?

If repo rate drops:

This sixth decrease since the rate-cutting cycle started in September 2024 would mean that homeowners are paying considerably less on their monthly bond repayments than they were in 2023 and 2024.

Homeowners with a R2 million bond will now be paying just over R2 000 less each month than they were in May 2023, when the prime lending rate was at a high of 11.75%.

The cut will encourage further bond activity. BetterBond’s data shows that application volumes are up 14% year-on-year for July and August – the highest level since 2022.

A drop in the repo rate, as well as the 5% drop year-on-year in the average deposit required for first-time buyers to secure a bond, as seen in BetterBond’s data for August, bodes well for new buyers wanting to access the market.

If repo holds steady: 

Holding the prime lending rate steady signals the Reserve Bank’s commitment to bringing inflation closer to the anchor target of 3%.

For homeowners, it means short-term restraint, but also the potential for renewed momentum in the property market once the next cycle of rate cuts begins, hopefully in the months ahead.

Five repo rate cuts since September last year have already stabilised conditions, and BetterBond’s latest figures show home loan applications are up 14% year-on-year in July and August.

If repo-rate holds:

Holding the repo rate steady could lead to a stabilisation of property prices, which, coupled with favourable deposit requirements, could make the market accessible to more buyers. It also sends a strong signal to investors about the Reserve Bank’s focus on stability and long-term economic growth.

If repo rate increases:

An increase in the prime lending rate should be seen through a long-term lens. The Reserve Bank is intent on shifting the inflation target closer to 3%, and raising the repo rate now helps offset the gradual rise in inflation during a period of subdued economic growth.

For homeowners, it means some short-term restraint – until the next cycle of rate cuts. Fortunately, the property market has shown remarkable resilience.

Five repo rate cuts since September last year have given it enough momentum to withstand this adjustment. BetterBond’s August data shows robust bond activity, with application volumes up 14% year-on-year, the highest level since 2022.

House prices have strengthened, up 2.1% year-on-year. The purchase prices for first-time buyers reached a record R1.3 million in July and August, while average deposit requirements have dropped by 5%.

Source: BetterBond

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