Low-interest rate reductions lead to significant annual savings for homeowners in 2025 during the housing market recovery.
The South African Reserve Bank (SARB) has continued its cycle of interest rate cuts, with the latest reduction bringing the main repo rate down to 7% on July 31, 2025. This move is expected to benefit first-time homebuyers by lowering borrowing costs, making home loans more affordable, and easing monthly repayments.
The SARB's decision to lower the repo rate is based on the current low and stable inflation of around 3%, which supports the possibility of sustained rate cuts without igniting inflationary risks. If inflation remains at this level, further cuts of about five times 25 basis points (to just below 6%) are possible over the medium term.
Lower repo rates typically translate into lower prime lending rates. Currently, the prime rate has dropped to about 10.50%, reducing mortgage interest costs for buyers. This provides breathing room for consumers, particularly first-time buyers facing financial pressure amid rising living costs. Even small cuts can boost market confidence and improve affordability.
However, the impact of these rate cuts may be moderate given cautious economic conditions and other cost pressures. South African households still confront headwinds such as rising food and utility costs, as well as domestic energy supply challenges (e.g., load shedding), which could limit disposable income and affordability for new buyers.
The economy’s modest growth forecast (0.9% in 2025) and ongoing global uncertainties (e.g., US tariffs) mean monetary policy remains cautious, tempering overly optimistic housing market growth.
Despite these challenges, first-time homebuyers have made a cautious but steady return to the market. In Q2 '25, ooba Home Loans saw an 11% year-on-year increase in home loan applications and a 18.5% increase in the total value of these applications.
Rhys Dyer, CEO of the ooba Group, believes that the rate cut will continue to support homebuyers and homebuying activity. In Q2 '25, Dyer's company, ooba Home Loans, had an average interest rate of prime less 0.67% for its customers.
The banks remain committed to supporting first-time homebuyers and expect their presence in the market to continue strengthening. The banks are actively supporting first-time homebuyers with attractive incentives like zero-deposit loans and high discounts to the prime lending rate.
In Q2 '25, 59% of first-time homebuyers secured a home without a deposit. The average deposit for first-time homebuyers has increased significantly compared to Q2 '20, to 10.4%. However, 10.5% of first-time homebuyers in Q2 '25 purchased a home without a deposit or access to funds for transfer and bond costs.
Borrowing costs are now 1.25% lower than they were a year ago. The rate cuts have not significantly increased the year-on-year growth of first-time homebuyers, which is up just 1% to 46%. This suggests that while rate cuts are helping, other factors are still limiting the growth in first-time homebuyers.
In conclusion, further SARB rate cuts can improve access to housing finance for first-time buyers by reducing mortgage rates and easing repayment burdens. However, affordability gains may be partially offset by persistent living cost increases and economic challenges. The pace and extent of cuts will depend on inflation targets and economic developments.
- The latest interest rate cut by the South African Reserve Bank (SARB) could potentially ease monthly repayments for first-time homebuyers, as the reduced repo rate translates into a lower prime lending rate, thereby reducing mortgage interest costs.
- The SARB's decision to cut the repo rate also offers a chance for further reductions, as sustained low inflation keeps the door open for further cuts of approximately five times 25 basis points over the medium term.
- Lower borrowing costs could positively impact personal-finance by providing breathing room for consumers, particularly first-time buyers, amid rising living costs, especially if further rate cuts occur.
- Nevertheless, despite reduced mortgage rates, other factors may still contribute to the limited growth in first-time homebuyers, including rising food and utility costs, and ongoing global uncertainties such as US tariffs, which could impact disposable income and affordability.
