Could South African Homeowners Get R850 Monthly Relief as Rate Cuts Loom?

South African homeowners may soon get a much-needed break, with the potential for monthly bond savings of up to R850, thanks to anticipated interest rate cuts by the South African Reserve Bank (SARB).

Although most economists expect the SARB to keep interest rates unchanged at its upcoming Monetary Policy Committee (MPC) meeting on 29 May, some believe there’s enough room for a modest 25 basis point cut—a move that could soften the financial strain on millions of bondholders.

A Case for Cutting Rates

The economic backdrop has shifted in recent months. Inflation has eased, global markets are slowly stabilizing, and several central banks—including those in the UK, China, and Mexico—have already trimmed their rates. Even Donald Trump’s temporary pause on new tariffs has reduced international market volatility.

Against this backdrop, some analysts argue that SARB could follow suit, especially with inflation remaining well within the target band. A recent visit by Bank of America (BofA) to South Africa resulted in a bold prediction: that SARB could lower its benchmark interest rate to 7% by July.

BofA cited falling oil prices, a weaker dollar, and low domestic inflation (expected to average 3.6%) as the key reasons for rate cuts happening sooner than expected.

Homeowners Could See Real Relief

If the SARB reduces rates by 25bps, homeowners stand to save a significant amount each month—especially those with larger bonds.

For example:

• A homeowner with a bond of R1.66 million (the national average) could save R856 per month.

• A homeowner with a R3 million bond could save R1,545.

• For high-end properties worth R5 million, the monthly saving could reach R2,576.

These potential savings are calculated from when the rate-cutting cycle began in late 2024.

Positive Ripple Effects in the Housing Market

The optimism surrounding rate cuts has already influenced buyer behavior. According to the oobarometer report, home loan applications in the first quarter of 2025 surged by 18%, and the total value of approved bonds rose by 22.3%.

“Interest rate expectations and improving confidence have driven a shift toward higher-value property purchases,” said Rhys Dyer, CEO of the ooba Group.

The average price among first-time buyers has climbed to over R1.24 million, marking a 4.5% year-on-year increase.

Relief May Be Brief Amid Rising Living Costs

While a rate cut would help ease monthly bond repayments, rising costs in other areas may offset the relief. Electricity, water, and fuel prices continue to climb, often outpacing inflation.

Finance Minister Enoch Godongwana recently increased the General Fuel Levy to compensate for the decision not to raise VAT, putting additional pressure on household budgets.

What’s Next?

Even if the SARB holds rates steady in May, the tone of the market suggests a rate cut is not far off. As inflation remains under control and global monetary easing continues, South Africans can hope for some breathing room.

But caution remains the order of the day. The SARB will weigh local and global risks before making any moves, especially as the rand remains vulnerable and inflationary pressures continue to shift.

Stay informed: The SARB’s next MPC decision is due on 29 May 2025, and could mark a turning point for thousands of households hoping for financial relief.

{Source: BusinessTech}

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