SA's rate cut: a move to boost the economy and property market
Image: SARB/Facebook
The recent interest rate cut sends a strong signal to investors that South Africa is intent on driving economic growth despite global challenges.
On Thursday, South African Reserve Bank governor Lesetja Kganyago announced that the Monetary Policy Committee (MPC) decided to reduce the policy rate by 25 basis points, to 7%, with effect from the 1st of August. He said this decision was unanimous.
South Africa's move is aligned with a cautious global trend toward stimulating consumer spending and investment, says Bradd Bendall, the national head of sales at BetterBond.
"Homeowners will welcome today's decision to drop the prime lending rate to 10.5% - a level last seen in 2022,' Bendall said.
He added that a lower prime lending rate provides much-needed relief to consumers and homeowners struggling to balance their monthly obligations with rising living expenses.
'For the average homeowner with a bond, this reduction could translate to meaningful monthly savings. On a R2 million home, for example, the monthly bond repayments will drop by R337 from R20 305 to R19 968. It will also reduce the amount payable over a 20-year period by R80 876.'
BetterBond said they expect this cut will further invigorate the housing market, which has already shown remarkable signs of recovery in recent months. Its July data shows that bond applications rose by 7.4% for the 12 months to May 2025, with home loans granted up by an impressive 13.6%, the mortgage broker said.
Bendall said these volumes point to renewed buyer confidence and a more stable market environment that should encourage more aspirant first-time buyers to enter the property market.
"The lower interest rate environment will benefit the local property sector going forward as property companies will be able to reduce their average financing costs through the refinance of upcoming debt maturities at lower rates, and the downward rebasing of their ZAR variable debt component's reference rate," says Unathi Hewana, the co-portfolio manager at Mergence Investment Managers.
'The local property market is heavily exposed to retail, so any improvement in consumer sentiment, driven by the lower interest rate environment and the consumer's own ability to better manage their debt financing costs will benefit the sector as well, as that can lead to more retail spend.
"An improvement in general business sentiment, on account of the lower interest rates, should also benefit the property sector, if that improvement in sentiment translates to an increase in demand for space.
"These instances can lead to positive property revaluations and better total return generation as they are supportive of both an increase in rental growth and a decrease in capitalisation rates,' Hewana said.
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 ✕
Standard Bank said this interest rate cut was expected, given the prevailing low inflation and muted economic growth in the first quarter of this year.
The bank said South Africa's GDP grew by only 0.1% in the first quarter, while inflation remained at the lower end of the SARB's target range, at 3% in June. The odds were tilted in favour of another rate cut, it said. However, the bank said the SARB is now targeting a 3% inflation rate, lower than the previous midpoint of 4.5%.
'This move could reshape the outlook for future interest rate decisions, and some homeowners may now be asking: Should I fix my bond rate now? The answer depends on your financial outlook," says Toni Anderson, the head of Home Services at Standard Bank.
'If you fix your rate now and the SARB starts hiking again, you've shielded yourself from future increases, which can bring much-needed predictability to your monthly expenses,' she explains.
'This could be a smart move if inflation remains sticky or if the target range is lowered, as such developments could affect future interest rate decisions.'
However, she warned that there is also a downside. 'If rates continue to fall or stay low for longer, fixing your rate could mean you end up paying more than you would on a variable rate,' Anderson adds.
'That's why we encourage customers to consider their financial goals, risk tolerance, and how long they plan to stay in their home.'
The head said as the economic outlook remains uncertain, the decision to fix or float should be based on personal risk tolerance and how long one plans to stay in their home.
Independent Media Property
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
IOL News
38 minutes ago
- IOL News
Budget cuts delay critical disaster management initiatives in KwaZulu-Natal
Several KwaZulu-Natal Provincial Disaster Management Centre (PDMC) projects, including the integration of video systems, were put on hold because of budget constraints. Image: KZN Legislature-Website Several KwaZulu-Natal Provincial Disaster Management Centre (PDMC) projects, including the integration of video systems, were put on hold because of budget constraints. The PDMC, in collaboration with the eThekwini Municipality and South African National Roads Agency SOC Ltd (SANRAL), is aiming to implement live video and surveillance cameras to enable real-time monitoring and reporting of disaster-related incidents. This initiative is not a standalone project, but rather it will be integrated with the Command and Control Collaborator (CMORE) software communication system as part of a broader information management and communication system. These setbacks were detailed when the KZN Cooperative Governance and Traditional Affairs (CoGTA) Portfolio Committee was briefed on PDMC matters on Friday. These PDMC setbacks could be implemented in the 2026/27 and the 2027/28 financial years, including the acquisition of rescue equipment (e.g., snow chains) and specialised disaster response training. In response to ongoing fiscal constraints, CoGTA was instructed by the Provincial Treasury to implement cost-cutting measures. Despite these constraints, a R2 million allocation has been made for the 2025/26 financial year to support the maintenance of integrated communication systems. This includes maintenance of boardroom audio-visual equipment and support for CMORE. The meeting also gave progress on the current status of post-disaster management grants funded by the National Disaster Management Centre (NDMC), including utilisation, challenges, and impact on recovery and resilience efforts in affected communities. The NDMC made R4.1 billion in grant funding available in the form of disaster response and recovery grants to the affected municipalities between 2019 and 2025. Dr Joey Krishnan, acting HOD of CoGTA, said that KZN did not have sufficient resources to manage disasters in the province, so they have engaged in many Memoranda of Understanding (MoUs) with various social partners. Krishnan said the social partners assist CoGTA with various types of support, relief material, food, blankets, as well as specialised training, and they come to the front when there are disasters. She said the collaboration was aimed at enhancing disaster management operations across the province. She said that the cooperation agreements signed on February 20, 2025, have significantly strengthened the KZN PDMC's capacity across all phases of disaster management. Marlaine Nair, CoGTA Portfolio Committee chairperson, said that the MoU between SANRAL, the South African Weather Services, and eThekwini to put cameras at strategic points so that the provincial DMC could monitor disasters and provide early warnings was not signed because it requires a significant budget that is not available. In addition, she said, the CMORE system that the department has piloted requires municipalities to purchase their smartphones, software, and data to be able to use. 'Currently, municipalities are budgeting the least amount for disaster management because of competing priorities. The Department of CoGTA must find an additional budget to be able to do much more in the province in terms of preparation for disaster preparedness and prevention,' she said. Tim Brauteseth, DA MPL, was concerned that after the April 2022 floods, an amount was allocated to eThekwini for expenditure on restoring infrastructure, but only a small amount of it had been spent to improve things. In response to Brauteseth, Krishnan said R861 million that was allocated to the eThekwini metro was returned to the national fiscus. 'We are aware of it and we have engaged eThekwini to provide details and reports in that regard. We have not received a detailed report in that sense, but in any event, they will have to make further applications now to the National Treasury, and we have indicated that we will support any application they make,' she said.
The Citizen
38 minutes ago
- The Citizen
Here are economic and geopolitical factors to affect SMEs
SMEs will receive useful guidance from the economic indicators set to be released during August. Small and medium enterprises (SMEs) should brace for impact as some economic and geopolitical factors will lead to unfavourable outcomes, while some will offer relief. As things stand, a 30% US tariff will be implemented on 7 August 2025 on exports, which is not very good news for businesses. But on the brighter side, the South African Reserve Bank (SARB) Monetary Policy Committee (MPC) has decided to cut interest rates, which can offer some relief to small businesses. Tariffs Miguel da Silva, Group Executive: Business Banking at TymeBank, said that with the upcoming implementation of the US tariffs, the South African government is making plans on how to mitigate the fallout. 'The South African Government has 'pulled out all the stops' during a flurry of trade delegations and counteroffers but is now making arrangements to deal with the expected fallout, including the establishment of an export-support desk that will provide updates and advisory services to exporters, and a rumoured package of Treasury-backed incentives for some affected sectors.' He, however, notes that the tariffs that matter are subject to change. In April, the Trump administration announced a 31% tariff on South Africa, which was then suddenly dropped to 10%. ALSO READ: US tariff of 30%: Rand weakest in 3 months, thousands of jobs in danger Sarb cuts interest rate The Reserve Bank Governor Lesetja Kganyago announced a 25-basis-point lowering of the interest rate on 31 July, and that the Sarb would be revising its inflation target to 3% from its previous 3–6% range. 'The revised target makes it unlikely that we will see any more interest-rate cuts this year, meaning borrowing will remain more expensive than many households and businesses might have hoped. 'Kganyago emphasised that the SARB expected the new target to enhance credibility with global investors, making borrowing for the state less expensive, and protect the rand (which has fallen to a several-month low nonetheless).' The release of the Consumer Price Index (CPI) inflation data from Statistics South Africa will give SMEs some guidance on input-cost planning in this tightening market. Uncertainty on business conditions He highlighted that SMEs will receive useful guidance from the economic indicators set to be released during August. The S&P Global South Africa PMI serves as a single-figure snapshot of operating conditions in the private-sector economy. While the recent Purchasing Managers Index (PMI) performance showed improvement to 50.8 in July 2025, marking the first growth since November 2024, and indicating the fastest business activity expansion in four years. 'The Bureau for Economic Research conducts its quarterly business confidence survey in mid-August, with questionnaires distributed to manufacturing, retail, wholesale, and construction sectors. 'Results, typically published in early September, will influence Q4 2025 business planning. Current confidence levels fell to 40 points in Q2 2025 from 45 points in Q1, remaining below the long-term average of 43 points, suggesting cautious SME sentiment, and who's to blame them.' ALSO READ: SMEs need to brace for reduced orders due to a 30% US tariff Global SME Ministerial Meeting Deputy President Paul Mashatile emphasised the importance of the African Continental Free Trade Area Agreement to the continent's entrepreneurial landscape during the Global SME Ministerial Meeting on 24 July 2025 in Boksburg. The meeting had representatives and Ministers from more than 100 countries to address the issues hindering SMEs from reaching their full potential under the theme 'Navigating New Business Frontiers'. However, da Silva noted that Mashatile did not mention any concrete measures the government is taking to support SMEs, apart from the R100 Billion Transformation Fund touted by Trade, Industry and Competition Minister Parks Tau. GNU passes a national budget 'In some good news, the government of national unity (GNU) continues to make its way unsteadily forward, with the National Council of Provinces effectively passing the 2025 National Budget. 'All GNU partners approved the Appropriation Bill that allowed the budget process to be concluded. When tough conditions prompt pragmatic alignment amongst our political leaders, at least there's some room for optimism,' he added. NOW READ: Repo rate cut no help for consumers on brink of financial disaster
TimesLIVE
3 hours ago
- TimesLIVE
Decay, refurbishments prompt move uptown for National Treasury
Finance minister Enoch Godongwana says the National Treasury can expect to save millions in its relocation from two buildings in the Pretoria CBD being vacated due to decay in one and refurbishments in the other. This emerged in a written reply by Godongwana to a parliamentary question by EFF MP Nothando Nolutshungu, who asked whether the Treasury had decided to permanently move from the two CBD buildings. 'The National Treasury has decided to vacate the building at 240 Madiba Street, Pretoria, due to significant building decay and infrastructural challenges, which pose serious health and safety risks for staff and operations,' Godongwana said. 'However, 40 Church Square has not been vacated. It remains state-owned and forms part of the Treasury's long-term accommodation strategy. The intention is to refurbish and retain it as a heritage finance building, given its historic and strategic value.' The Treasury was finalising the new leased offices and waiting for the signed lease agreement between the prospective landlord and the public works and infrastructure department (DPWI). 'The rental cost under the former lease for 240 Madiba Street was R6,799,376.36 per month. The rental for 40 Church Square is R2,629,209.66 per quarter. Leases are entered into between the DPWI and the prospective landlord and are waiting to be finalised.' The new premises are owned by the Public Investment Corporation and finalising the lease is still under way. A signed lease agreement between the prospective landlord and the DPWI is being awaited. 'An assessment was conducted on the condition and potential refurbishment of 40 Church Square. As a result, the building is to be retained and refurbished, with plans aligned to preserving its heritage status and ensure it remains functional within the Treasury's accommodation portfolio.' While the Treasury acknowledged the long-term fiscal benefits of government ownership of office accommodation, these matters reside with the DPWI, he said.
