South African homeowners’ R3,700 win

Between December 2024 and December 2025, South Africa’s prime lending rate has declined by a notable 100 basis points, saving homeowners thousands on their monthly home repayments.

This represents much-needed relief for South African homeowners, who faced sky-high interest rates over the past few years as the Reserve Bank attempted to rein in the country’s sticky inflation.

With this goal accomplished and a new inflation target announced, experts believe the Reserve Bank now has room to continue cutting interest rates, with more relief for homeowners expected in the coming years.

South Africans with debt have had a tough few years following the Covid-19 pandemic, as the Reserve Bank’s Monetary Policy Committee (MPC) embarked on a hiking cycle in November 2021.

This followed a period of substantial easing during the pandemic, when the MPC slashed rates to support struggling households and the economy.

However, near the end of 2021, the Reserve Bank and many other central banks around the world became concerned about rising inflation and entered a hiking cycle. 

This cycle would see the MPC implement 475 basis points of cuts between November 2021 and May 2023, bringing interest rates to 15-year highs.

The MPC hiked the repo rate to 11.75% and the prime lending rate to 8.25%. To make matters worse for homeowners, it kept rates unchanged at these high levels until September 2024, when the committee cut rates for the first time in years.

This cut kicked off the MPC’s current cutting cycle, which has not been as consistent or aggressive as the hiking cycle that preceded it.

In the current cutting cycle, the Reserve Bank has implemented 150 basis points worth of cuts, bringing the repo rate down to 6.75% and the prime lending rate down to 10.25%.

Daily Investor calculated how these cuts have affected South African homeowners’ monthly home loan repayments over the past year.

This analysis, presented in the table below, was based on a standard 20-year home loan, using the prime lending rates in December 2024 (11.25%) and December 2025 (10.25%).

More relief coming

Luckily for South African homeowners, many experts predict that the MPC will continue this cutting cycle into the new year, with the committee still having room to cut.

Symmetry chief investment strategist Izak Odendaal believes that the Reserve Bank is likely to continue cutting interest rates through 2026 as inflation peaks early next year and begins to decline towards its 3% target.

This 3% target was officially adopted in November 2025, when Finance Minister Enoch Godongwana made the announcement in his Medium-Term Budget Policy Statement.

Unofficially, this new target has been factored into the MPC’s decisions since mid-2025, when the committee announced that it would now prefer for inflation to settle around the lower end of its old target band.

The Reserve Bank’s old target, a range of 3% to 6%, had been in place since 2000, when inflation targeting was first adopted in South Africa as a monetary policy tool.

The new 3% target positions South Africa more in line with its global peers, with the Reserve Bank believing it will also bring immense benefits to the economy.

This includes lower inflation and interest rates over the long term and reduced state borrowing costs, boosting spending and investment in the economy.

However, many have been concerned that this lower target will, at least in the short term, put an end to the Reserve Bank’s cutting cycle, keeping interest rates higher for longer.

However, Odendaal said that, while inflation is expected to rise in the coming months, this will be at a slow pace.

He said there are no major risks to the inflation picture, with the rand holding its own against the US dollar, geopolitical tensions easing, and South Africa’s state finances improving. 

Therefore, he believes November’s interest rate cut will not be the MPC’s last in this cycle, with the committee’s quarterly projection model indicating further rate cuts.

This model is a forecast of where the repo rate should be, given all the other economic assumptions made by the Reserve Bank.

While merely a guide rather than a guarantee, this model currently points to rates declining to 6% by 2027.

The Reserve Bank expects inflation to peak at 3.8% in the second quarter of 2026 before falling to around 3%, with an average rate of 3.5% in 2026 and 3.1% in 2027. 

If inflation behaves as expected, interest rates should continue falling, bringing even more relief for South African households and boosting their disposable income.