Interest Rate Cuts Spark Credit Boom in South Africa, But Property Market Lags Behind

May 2025 sees a sharper-than-expected jump in borrowing, though home loans remain stuck in neutral

South Africans are borrowing more and faster than economists predicted. Following a series of aggressive interest rate cuts, credit demand in May 2025 jumped by 5.0%, up from 4.6% in April and well above the market forecast of 3.0%.

This surge is being linked to the South African Reserve Bank’s (SARB) string of interest rate reductions, 175 basis points between September 2024 and May 2025, capped off with a final 25-point cut on 29 May. The result? A renewed hunger for credit across the board.

Borrowing Up, But Not Everywhere

While more South Africans are swiping cards and applying for loans, the property market remains notably sluggish. Mortgage lending in May ticked up just 3.5%, barely budging from April’s flat performance.

Economists say the muted property market is a hangover from late 2023, when higher rates choked off homebuyer appetite. And despite the recent relief, other challenges are holding back a housing rebound:

• High consumer debt

• Stagnant wages

• Rising cost of living

Until those factors ease, buying homes and investing in fixed assets will likely remain a cautious affair.

Short-Term Credit Tells a Different Story

Elsewhere, though, South Africans are clearly borrowing to keep up with rising expenses.

• Other loans and advances (like personal loans and revolving credit) jumped 7.0% in May, up from 6.6% in April.

• Instalment credit sales, typically for durable goods like furniture and appliances, rose by nearly 1% month-on-month, continuing their steady climb.

• Year-on-year, instalment credit has grown by 6.2%.

This pattern confirms what many households have long felt: as food, transport, and utility costs climb, short-term borrowing becomes a lifeline.

A Turning Point for 2025?

Analysts are cautiously optimistic. The cumulative impact of rate cuts, paired with subdued inflation, could gradually loosen up household finances in the second half of the year. This would boost not only consumer spending, but potentially revive interest in the property sector and longer-term investment.

“We’re seeing the early signs of momentum building,” said one local economist. “But we won’t feel the full benefit of the rate cuts until consumer confidence, wages, and inflation all align.”

More Easing Possible

With inflation trends remaining favourable, SARB could leave the door open for further rate cuts later in 2025. If that happens, expect more South Africans to re-enter the credit market, this time with an eye toward bigger purchases.

{Source: IOL}

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