Academic predicts no interest rate increase today - what this means for South Africa

There will be no interest rate hike when the Monetary Policy Committee announces its decision on Thursday afternoon. 

This is a confident assertion of Dr Farai Nyika, the academic programme leader at the Management College of Southern Africa's(MANCOSA) School of Public Administration.

Market consensus ahead of MPC announcement 

The academic says market consensus is that another 25 basis points cut is imminent, adding that the market is generally correct. 

However, Nyika says there is a chance that rates will stay the same, considering that last week, the Minister of Finance Enoch Godongwana announced in his Medium Term Budget Policy Statement(MTBPS) that the South African Reserve Bank (SARB) will aim for a stricter inflation target of 3% with a 1% tolerance over the next two years.

“I struggle to see how that target can be achieved with continued rate cuts, as these have an inflationary effect in the long-term, as they encourage spending. What I am reasonably confident in saying is that rates will not be raised on Thursday, 20 November 2025.” 

Nyika says that a rate hold or cut will benefit the post-Covid property market recovery and the economy at large.

What is important to note is that the economy is proving to be relatively resilient to US President Donald Trump’s tariffs, and a rate cut will help the whole market in this regard, he adds.

Current property market status

Asked how this final interest rate decision for this year finds the local property market, the academic says South Africa’s property market is stabilising, having benefited from a rate-cutting cycle that started about a year ago. 

However, he says the market is still some way off pre-pandemic levels, a period of 5 to 6 years ago.

“It is difficult to generalise RSA’s property market as it is very divided provincially, with Gauteng struggling, while the Western Cape is thriving. I know this because while two years ago, there were many more available properties for sale in Cape Town for around R1.3m to R1.7m than there are today. Today, those properties are now selling for R1.6m to R2m.”

The market continues to strengthen, supported by lower interest rates and improving demand, says Siphamandla Mkhwanazi, FNB's senior economist. 

He says house prices have continued to rise, outstripping inflation and further reinforcing consumer balance sheets.“Our analysis suggests that while recent interest rate cuts have helped revive demand, constrained property supply remains the primary force driving the current upward trend in prices.”  

The senior economist says they believe that a pause is appropriate for now. However, he says the probability of a cut early in the year has risen materially since the National Treasury’s announcement. 

Mkhwanazi says the market is still benefiting from past interest rate decisions. “Once these effects have fully materialised, we could see an even stronger demand, particularly from first-time home buyers.”  

Advice for aspiring property owners

Nyika encourages potential homeowners to have a greater buffer than what banks generally advise when making a purchasing decision. He says banks usually assess debt affordability as a third (⅓) of gross income.

I argue that debt affordability should be closer to a quarter (¼) of gross income, simply because energy costs and municipal charges are rising faster than inflation. This is important to factor in when deciding to buy property in a rate-cutting cycle.

Meanwhile, Renier Kriek, the managing director at Sentinel Homes, says they differ from the MPC in its persistent hawkishness. He says they have consistently argued for prioritising growth before attempting to crush inflation outright, while the MPC has preferred to anchor expectations firmly around the lower inflation target first.

“That approach has brought benefits-including reduced long-dated government borrowing costs and a measure of fiscal breathing room-but it has also kept real interest rates uncomfortably high for an extended period. Households and businesses have felt the strain.” 

The alternative home financier says high real interest rates act as a brake on fixed capital formation, discouraging large-scale investment in factories, infrastructure, and productive capacity.

It adds that this, in turn, weighs on growth and jobs, and it has deepened South Africa’s housing supply crisis. “The country faces an estimated backlog of 3.5 million formal homes, with the poorest households and the so-called “gap market”-properties between R250 000 and R850 000-the most severely affected.

"Roughly 80% of households are effectively priced out of the formal housing market. This is not only an economic risk; it is a social and political one.”

“Setting monetary policy is a delicate balancing act. The MPC must weigh the short-term need for lower real interest rates against the long-term credibility benefits of its new target,” Kriek says.“A modest 25 basis-point cut would send an important signal.” 

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