Rate cut ushers in renewed confidence for homebuyers

Yesterday’s 25 basis point rate cut by the South African Reserve Bank (SARB) – lowering the repo rate to 6.75% and the prime lending rate to 10.25% – delivers a welcome boost for consumers and the property market as the year ends.

The headline consumer inflation rate ticked up to 3.6% in October, as expected. While the highest CPI reading in over a year, it remains within the Reserve Bank’s recent adoption of a 3% inflation target which carries a flexible range of 1 percentage point. Gavin Lomberg, CEO of ooba Home Loans, says the decision to cut interest rates once again reflects renewed confidence in South Africa’s economic outlook.

“This sixth rate cut since September 2024 has effectively reduced borrowing costs by 1.5% in the past 14 months.  This provides meaningful relief for consumers and reinforces optimism in the country’s recovery,” says Lomberg. “It’s a positive signal for the property market going into 2026.”

SARB Takes a Measured Step in the Easing Cycle

The SARB’s decision reflects cautious optimism and a gradually improving economic outlook. 

“The Reserve Bank has balanced supporting growth with maintaining its inflation-fighting credibility,” says Lomberg. “This cut shows that despite a modest rise in inflation to 3.6%, progress in containing price pressures is creating some room to stimulate the economy.”

“South Africa’s recent exiting from the Financial Action Task Force grey list, alongside its first credit ratings upgrade since 2005, has boosted investor confidence,” Lomberg adds.

“Likewise, financial markets responded positively to the Medium-Term Budget Policy Statement, which played a critical role, delivering the first stabilisation in South Africa’s debt-to-GDP ratio since 2008 and formally adopting the 3% inflation target, confirming government’s firm commitment to price stability.”

International factors also provided a supportive backdrop. Lomberg says global central banks are mostly still in an easing cycle, with the end of the longest US government shutdown in history reducing short-term uncertainty in global markets.

“If current trends continue, it is possible that there will be further modest easing of interest rates during 2026,” says Lomberg.

Positive Momentum for South Africa’s Housing Market

South Africa’s residential property market has shown resilience despite sluggish economic growth, and the latest cut is expected to inject further momentum. According to the Quarter 3 2025 (Q3 ’25) oobarometer, there has been renewed buyer activity and improved affordability, which is good news for the property market.

Lomberg notes that home loan applications were up 7% quarter-on-quarter, with the total value of applications increasing by 10% year-on-year, driven by buyers purchasing higher-priced properties: “Likewise, the average approval rate rose by 1.1% from Q2 ’25 to 83.9%, while prequalified buyers achieved a much higher 91.0% approval rate.”

First-time homebuyers, he noted, have increased to 46.8% of all applications, with the average deposit size falling 13.6% year-on-year to 8.9%, showing banks’ willingness to support new entrants.

“Lower borrowing costs directly support affordability,” says Lomberg. “With rates now at their lowest in 3 years, we expect to see more first-time buyers entering the market, particularly in regions like Gauteng South & East and the Free State, where average purchase prices remain below the R1m mark.”

In contrast, Lomberg says the Western Cape, where property values are highest, will continue to attract experienced buyers, semigrants and investors taking advantage of the lower interest environment to grow their property portfolio.

“The combination of lower rates, improving sentiment, and stronger bank competition is setting the stage for a more active and confident property market in 2026,” he adds.

Smart Moves for Homeowners to Maximise the Rate Cut

While the 25-basis point cut offers immediate relief on monthly bond repayments, Lomberg says now is the ideal time for homeowners to get ahead. “This is the perfect opportunity to use your savings to strengthen your financial position,” he advises.

He recommends a balanced approach: “Rather than paying off your bond completely, as you may lose out on certain tax deductions and the benefits of holding a low-interest rate, channel extra funds into your home loan to save on long-term interest while keeping flexibility.”

To achieve this, Lomberg suggests:

1. Find extra cash: “Sell unused items, rent out spare space, or channel emergency savings into your bond to reduce your outstanding balance and the interest you pay.”
2. Pay extra into your bond: “An extra R1 000 per month on a R1.5m, 20-year bond at the prime lending rate of 10.25% could help you settle it three-and-a-half years early.”
3. Pay bonuses to your bond: “Allocating even a portion of salary increases or annual bonuses can make a significant dent in your repayment period.”
4. Use cash windfalls to pay lump sums: “Redirecting tax refunds, 13th cheques, or inheritance funds into your bond will lower your interest burden immediately.”
5. Set a target date: “Setting a goal helps you stay motivated. The ooba Home Loans Bond Repayment Calculator can help you determine how much extra you’ll need to pay each month to reach it.”

“We’re entering 2026 with the most encouraging conditions the property market has seen in years,” concludes Lomberg. “Lower rates mean more opportunity for homeowners to save, for first-time buyers to enter the market, and for our economy to regain momentum.”

Issued by Jess Gois