Homeowners Experience Significant Annual Savings in 2025 Due to Mortgage Rate Reductions as Housing Market Demand Revives
The South African Reserve Bank (SARB) has reduced the main repo rate by 25-basis points for the second consecutive time, bringing it down to 7%. This move typically lowers borrowing costs, stimulating home buying activity, particularly among first-time homebuyers [1][3].
The recent cuts have brought the prime lending rate down to 10.50%, offering some financial relief for consumers and boosting buyer confidence [1][3]. Despite inflation remaining at the lower end of the target range (around 3%) and other household costs continuing to rise, the moderation in interest rates is expected to ease the borrowing costs on mortgages [1][3].
This easing of borrowing costs is crucial for first-time buyers, who are making a steady return to the market, fueled by recent rate cuts [6]. In Q2 '25, first-time homebuyers have experienced a 1% year-on-year growth, reaching 46% [7]. Moreover, 59% of first-time homebuyers secured a home without a deposit in Q2 '25 [5].
The higher value of home loan applications in Q2 '25 reflects the higher average monthly gross income across four of the nine regional housing markets [8]. Ooba Home Loans, a leading mortgage originator, reported an 11% year-on-year increase in home loan applications and a 18.5% increase in the total value of these applications [9].
However, broader economic challenges, such as weak GDP growth, global uncertainties, and domestic risks, may moderate the overall effect on home buying activity. Rhys Dyer, CEO of the ooba Group, believes that there is still scope for a further reduction in interest rates [10]. The banks remain committed to supporting first-time homebuyers and expect their presence in the market to continue strengthening [11].
Despite these economic headwinds, the lower interest rates are making homes more affordable, leading to first-time homebuyers spending 3.5% more on homes year-on-year [2]. The average deposit for first-time homebuyers in Q2 '25 is 10.4%, significantly higher than in Q2 '20 at 8.45%, but deposits for the average homebuyer have decreased by 13.5% year-on-year, and by 1.9% for first-time homebuyers [2].
In conclusion, the consecutive rate cuts by the SARB are creating more favorable borrowing conditions, likely encouraging higher home buying activity by improving affordability for first-time buyers. However, the overall effect could be tempered by ongoing economic headwinds [1][2][3][4].
[1] South African Reserve Bank (SARB) [2] Average deposit for first-time homebuyers in Q2 '25 [3] Current prime lending rate and its impact on home buying activity [4] SARB's aim to maintain inflation near 3% and its impact on home buying activity [5] Percentage of first-time homebuyers securing a home without a deposit in Q2 '25 [6] First-time homebuyers returning to the market [7] Year-on-year growth in first-time homebuyers in Q2 '25 [8] Higher average monthly gross income across four of the nine regional housing markets [9] Ooba Home Loans' increase in home loan applications in Q2 '25 [10] Rhys Dyer's belief in further interest rate reductions [11] Banks' commitment to supporting first-time homebuyers and their presence in the market
- The consecutive rate cuts by the South African Reserve Bank (SARB) are influencing the news of the housing-market, as the lower interest rates are making homes more affordable, particularly for first-time homebuyers, who are making a return to the market and experiencing a 1% year-on-year growth [1][2][3].
- In the realm of personal-finance, the recent reduction in the prime lending rate by the SARB offers some financial relief for consumers, as it brings the prime lending rate down to 10.50%, boosting buyer confidence and easing the borrowing costs on mortgages [1][3].
- The impact of these rate cuts extends to the realm of investing and finance, as the banks remain committed to supporting first-time homebuyers, expecting their presence in the market to continue strengthening, due to the increased affordability [11].
