The South African Reserve Bank’s 25-basis-point interest-rate hike will add pressure to households already facing rising costs, particularly homeowners, prospective buyers and tenants.
The Monetary Policy Committee (MPC) raised the repo rate to 7.25%, effective from 25 September. This brings the prime lending rate to 10.75%.
In the property market, the increase will raise borrowing costs for new buyers, put further pressure on home-loan repayments and affect rental affordability.
Lesetja Kganyago, governor of the South African Reserve Bank (SARB), announced that the MPC had unanimously decided to raise the repo rate by 25 basis points to 7.25%.
René Moonsamy, director at National Debt Counsellors, said the increase raised the cost of variable-rate debt, including many home loans.
“When financing costs remain high or rise further, prospective buyers qualify for less, existing homeowners have less disposable income, and investors have to reconsider the economics of financed property. That can soften demand and make affordability an even bigger factor in purchasing decisions.”
Moonsamy said households would have less disposable income to spend elsewhere in the economy.
“At the same time, controlling inflation matters for households too, so the Reserve Bank is balancing different pressures.”
For the rental market, she said homeowners would have to accommodate higher bond repayments.
“Landlords who are themselves servicing bonds may also face higher financing costs, but that does not automatically mean those costs can simply be passed on to tenants. Tenants have affordability limits too, and rental increases ultimately have to operate within what the market and the household can sustain.”
She added that financial pressure was no longer confined to traditionally high-risk consumers.
“Increasingly, people with regular incomes and a good history of meeting their commitments are struggling because several costs have risen at the same time.”
She said households were contending with bond or rent payments, transport, electricity, insurance, food and existing debt repayments.
“So even a relatively small additional increase can matter when there is already very little disposable income left.”
Dr Andrew Golding, chief executive of the Pam Golding Property group, said the MPC’s decision to increase the repo rate by 25 basis points reflected growing inflationary risks facing the South African economy, particularly higher oil prices and ongoing uncertainty arising from the conflict in the Middle East.
He added that the rate hike would mean buyers would be more careful about affordability and financing costs.
“The increase is likely to reinforce the need for buyers to be more discerning about affordability and financing costs, but it does not alter the underlying demand for well-located residential property, particularly in markets supported by employment, infrastructure, lifestyle appeal and population growth.”
Stephan Potgieter, CEO of BetterHome Group Mortgage Origination and BetterBond, said homeowners would face renewed pressure.
“Although this isn’t the outcome households were hoping for, the increase should be viewed as a precautionary measure to absorb any potential oil price shocks amid ongoing hostilities in the Middle East.”
Samuel Seeff, chairman of the Seeff Property Group, said the interest-rate increase was another blow to consumers and the struggling economy.
He said it had been hoped that the SARB would look past short-term spikes and focus on protecting long-term economic stability. The current inflationary spike was driven by temporary factors such as oil prices rather than runaway domestic demand, he added.
“The higher interest rate will do little to mitigate external cost shocks but will inflict real financial pain on households and businesses. With national economic growth forecasts already downgraded from 1.4 percent to around 1.1 percent, the higher borrowing costs risk further depressing consumer confidence and spending.”
He added that the decision unnecessarily punished already overburdened consumers and would dampen economic and property-market activity.
“This rate hike now also effectively wipes out most of the relief gains over the last year, pushing prime to its highest level since May 2025,” Seeff said.
given.majola@nationalmg.co.za