logo
Interest rates in flux: property expert discusses potential outcomes amid uncertainty

Interest rates in flux: property expert discusses potential outcomes amid uncertainty

IOL News26-05-2025
All eyes will be on the South African Reserve Bank's (SARB) Monetary Policy Committee's decision on where it leaves the interest rates this week.
Image: Bongani Shilubane/ Independent Newspapers.
The outcome of Thursday's Monetary Policy Committee meeting could go either way in these uncertain times.
Bradd Bendall, National Head of Sales at BetterBond, said while recent global and local economic indicators might suggest that there is room for a much-needed rate cut, the South African Reserve Bank's decision remains difficult to call.
'However, we are optimistic that the Reserve Bank will take a bold stance to lower the prime lending rate by at least 25 bps. It seems like the right time to adopt a more accommodating approach.
"Inflation has been trending downwards since last year, and the US's pause on tariff measures has returned some stability to global markets. We have seen the Bank of England and the European Central Bank drop their respective repo rates by 25 bps, and we expect South Africa to follow suit,' Bendall said.
He said that if the rate does drop, it will only be the second cut this year. The shift will certainly bring welcome relief to homeowners and consumers grappling with higher living expenses and fuel tax hikes, he added.
BetterBond said its home loan applications have increased by 2.2% year on year, according to their May data, signalling a recovery in home buying activity after a period of stagnation. It said any further rate cuts will go a long way to boosting the housing market.
'At a time when the world is holding its breath amid global monetary policy shifts, a drop in the prime lending rate would send a strong signal that South Africa prioritises economic growth and market stability.'
Video Player is loading.
Play Video
Play
Unmute
Current Time
0:00
/
Duration
-:-
Loaded :
0%
Stream Type LIVE
Seek to live, currently behind live
LIVE
Remaining Time
-
0:00
This is a modal window.
Beginning of dialog window. Escape will cancel and close the window.
Text Color White Black Red Green Blue Yellow Magenta Cyan
Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan
Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan
Transparency Transparent Semi-Transparent Opaque
Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps
Reset
restore all settings to the default values Done
Close Modal Dialog
End of dialog window.
Advertisement
Next
Stay
Close ✕
On Monday morning, Reezwana Sumad, research analyst at Nedbank CIB, said the final session of last week saw the USDZAR trading at R17.93 at the open.
'Overall, the local unit posted steady gains. After having had a brief foray towards the R18 00 level, it ended the session trading at R17.84. This morning, the USDZAR is currently trading at R17.81.
"The major currency pairs also traded broadly firmer over the course of the previous session, with the EURUSD trading at 1,1410 this morning from the previous open at 1,1312 and the GBPUSD at 1,3580.
"Possible trading range for the USDZAR today is R17.65 to R17.95. The markets are likely to trade cautiously today, and liquidity is at a premium, as both the London and New York markets are closed. The local unit continues to trade in positive territory, as the USD remains under pressure across the board,' Sumad said.
At the beginning of this month, Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, said he believes that the benefits of an interest rate cut at this time would outweigh the potential risks that the SARB is guarding against.
Thus far, the ongoing global trade tensions and domestic economic challenges have led the SARB to adopt a cautious approach, favouring rate stability to navigate potential risks.
'Reducing the repo rate could boost consumer confidence, increase affordability, and encourage greater economic growth. Lower interest rates translate into reduced monthly repayments on home loans and other debts, putting more money back into consumers' pockets and stimulating broader economic activity.
"This additional disposable income will positively impact other sectors reliant on consumer spending, driving economic growth across the board,' Goslett said.
Moreover, Goslett added that an interest rate cut will send a strong positive signal to international and local investors, reinforcing confidence in South Africa's economic recovery trajectory, especially following the instability around VAT.
Despite inflation being the lowest it has been since June 2020, economists widely anticipate that the SARB will keep the repo rate unchanged later this week.
Independent Media Property
Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

This is what June's inflation results mean for your pocket and trolley
This is what June's inflation results mean for your pocket and trolley

IOL News

time12 hours ago

  • IOL News

This is what June's inflation results mean for your pocket and trolley

June's inflation data revealed a rise to 3.0%, up from 2.8% in April and May, signalling a shift that could hit both consumers and portfolios. While fuel prices are easing, grocery bills are climbing fast, with food inflation at a 15-month high of 5.1%. Image: Squirrel photos/Pixabay After maintaining stability at 2.8% in April and May, South African inflation experienced a notable rise in June, aligning with projections from economists and signalling new considerations for the SA Reserve Bank ahead of its upcoming interest rate review. What does it mean? Your grocery basket is more expensive – Meat, fruit, and vegetables are driving food inflation – Meat, fruit, and vegetables are driving food inflation Fuel relief is real – but might not last – Prices are down now, but oil market risks loom – Prices are down now, but oil market risks loom Interest rate outlook in question – SARB's next move could affect loan repayments, mortgages, and household budgets – SARB's next move could affect loan repayments, mortgages, and household budgets Trade wars and tariffs could make things worse – Global instability could hit SA's agricultural and automotive sectors The annual consumer price inflation recorded a 3.0% increase, while the Consumer Price Index (CPI) rose by 0.3% month-on-month, reflecting the complex dynamics within the nation's economy. Despite remaining close to the lower threshold of the South African Reserve Bank's (SARB) inflation target range of 3% to 6%, the increased rate raises concerns. The heightened inflation is now driven primarily by the food and non-alcoholic beverages sector, which saw its annual rate soar to a 15-month high of 5.1% in June. Within this category, meat, particularly beef, emerged as a significant contributor to the food inflation spike, alongside other unprocessed food items. This upward trend is compounded by fruits and nuts, and vegetables maintaining double-digit inflation rates for the second consecutive month. Interestingly, while food costs escalated, fuel prices have continued their decline, marking a fourth month of reduced prices. The cost of fuel is currently on average 11.2% lower than it was a year ago, providing some respite amid rising food costs. Delving deeper, the annual inflation rate for goods surged to 2.3%, an increase from 1.8% in May, whereas the service sector received a slight boost as its inflation rose to 3.7% from 3.6% the previous month. South African Reserve Bank chief Lesetja Kganyago has expressed concerns regarding external factors, most notably the depreciation of the US dollar due to potential tariffs and deflationary pressures emanating from China. These challenges pose significant risks to the local inflation landscape and broader economic activity. Kganyago highlighted that if tariffs are imposed, sectors such as agriculture and automotive could suffer, further stressing South Africa's economic framework. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ The prevailing uncertainty in the economic landscape has resulted in mixed expectations among economists concerning the decisions of South Africa's Monetary Policy Committee (MPC) during its upcoming rate-setting meeting. Earlier this year, the bank has already implemented two cuts to the repo rate, the latest occurring in May. While some analysts advocate for the continuation of this easing cycle, arguing that inflation has remained consistently low, others believe the committee may choose to maintain the current rates in light of potential volatility. IOL

South Africa's economic growth outlook: What to expect in the coming months
South Africa's economic growth outlook: What to expect in the coming months

IOL News

time20 hours ago

  • IOL News

South Africa's economic growth outlook: What to expect in the coming months

Although Investec sees better second quarter economic growth than the first, but not by a large amount.. Although the economy doesn't look very bright at the moment, with forecasts having recently been trimmed on the back of US President Donald Trump's pending 30% in tariffs, all may not be doom and gloom. The South African Reserve Bank's (SARB's) Composite Business Cycle Indicators may show that the next six to 12 months don't look that positive, the current position and that of the most recent economic situation, gained. Commenting on the latest indicator, Investec chief economist Annabel Bishop said that she anticipates a better gross domestic product (GDP) growth rate in the second quarter than the first three months of the year. However, Bishop does not expect to see especially strong growth in the second quarter. In the first quarter, GDP came in at a mere 0.1%, with the fact that it gained at all being due to agriculture. This figure surpassed economists' expectations. The economy grew 0.6% last year. Investec Wealth & Investment's data shows that growth has averaged 4.5% since 2010, and the unemployment rate would be significantly lower.

How rising inflation affects interest rates in South Africa
How rising inflation affects interest rates in South Africa

IOL News

time20 hours ago

  • IOL News

How rising inflation affects interest rates in South Africa

Although inflation in South Africa has edged up slightly, economists believe that interest rate cuts are still likely – and necessary – as the overall price environment remains subdued even though prices are expected to continue to rise. June's consumer price index (CPI) rose to 3%, up from May's 2.8%, marking the first time in three months that inflation has returned to within the South African Reserve Bank's (SARB) 3% to 6% target range. Despite this small increase, inflation remains low by historical standards and well below the 5.2% seen a year ago. Old Mutual chief economist Johann Els said that while food prices, particularly red meat, were a touch higher than expected, partly due to the effects of foot-and-mouth disease, most categories remained muted. 'Consumer goods inflation is still very subdued,' he said, with clothing, furniture, and appliances still in negative territory year-on-year and core inflation slipping to 2.9%. This paints a picture of an economy with weak pricing pressure, which Els argued justifies a further 0.25 percentage point cut to interest rates at the Monetary Policy Committee meeting next week. Els said government has a 'window of opportunity' to announce a reduced 3% target for inflation. SARB governor Lesetja Kganyago has been pushing for a lower inflation target, although this will require a National Treasury policy change. 'If we miss this window of opportunity over the next few months, it's going to be more difficult for the Reserve Bank to get inflation down sustainably to 3%' as it will start drifting upwards into next year, he says. Els said that inflation is expected to rise moderately through the rest of the year, approaching 4% by December. 'If we miss this window, it will become more difficult for the Reserve Bank to sustainably bring inflation closer to 3% once it starts drifting upwards again.'

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into a world of global content with local flavor? Download Daily8 app today from your preferred app store and start exploring.
app-storeplay-store