Residents of South Africa will start paying more for their vehicle and housing loans starting in October. This is because the South African Reserve Bank's Monetary Policy Committee (SARB MPC) raised the repo rate by 25 basis points.
As a result of this decision, the base lending rate will increase by 0.25%, reaching 10.75%. SARB manager Lesetja Kganyago stated that with rising fuel prices, the overall inflation level is projected to reach 5% before slowing down to 3% by the end of 2027.
Previously, on Thursday, Statistics South Africa (Stats SA) reported that the country's inflation slightly increased to 4.4% in August compared to 4.3% in July. Although consumer prices remained largely unchanged during the month, the rise in fuel prices in September and October is expected to impact the inflation forecast.
FNB Chief Economist Mamello Matikinka-Ngwenya stated that the MPC's decision to raise the repo rate by 25 basis points reflects the need to strengthen confidence in policy amid increasing external inflationary risks and keeping inflation expectations above SARB's target of 3%.
How will the base rate hike affect your car and mortgage payments?
Regarding car payments, according to calculations, for a vehicle loan worth 250,000 rand, the monthly payment will increase by 32 rand. For a 500,000 rand loan, the increase will be 64 rand, and for a 1 million rand loan, it will be 127 rand. These forecasts are based on a six-year term without a deposit, calculated at the base rate.
If we assume the loan was just taken out, the 25 basis point increase will add 2,292 rand to the interest account over six years for a 250,000 rand loan and 4,583 rand for a 500,000 rand loan.
Concerning mortgage payments, if you have a mortgage loan of 800,000 rand at a 20-year base rate, the monthly installment is expected to increase by approximately 135 rand. Those with mortgages of 1.5 million rand, approaching the average housing price in South Africa, will pay about 253 rand more, while holders of 3 million rand loans should find an additional 505 rand.
Additional interest costs over the loan term will amount to about 32,350 rand for an 800,000 rand loan, rising to 60,657 rand for a 1.5 million rand debt and 101,094 rand for a 2.5 million rand example.
Impact on consumers
Samuel Seeff, Chairman of Seeff Property Group, believes that the interest rate hike will little mitigate external cost shocks but will cause real financial damage to households and businesses. He noted that he hoped the Bank would ignore short-term spikes and focus on protecting long-term economic stability. In his view, the current inflationary surge is caused by temporary factors, such as oil prices, not uncontrolled domestic demand.
Seeff stated that this move unfairly punishes already burdened consumers and will slow down activity in the property and economy markets. He emphasized that household budgets are already under pressure following the May rate hike and other spending increases. Monthly mortgage payments will now increase, threatening mortgage defaults and worsening affordability issues for first-time homebuyers.
However, FNB argues that the latest rate hike does not necessarily signal the beginning of a prolonged tightening cycle. FNB CEO Litania Johnson noted that economic growth remains moderate, unemployment is high, and consumers continue to feel the impact of the rising cost of living. She added that while today's decision may be difficult for many households and businesses, managing inflationary risks remains critical to protecting purchasing power and maintaining long-term economic confidence.
Buyers seeking cost-inclusive loans note Dr. Andrew Golding, CEO of Pam Golding Property Group, that although a higher rate will inevitably create additional pressure on potential homeowners, especially first-time buyers, banks continue to support activity in the housing market through competitive lending and products designed to lower initial financial barriers to homeownership.
Golding reported that 'zero deposit and cost-inclusive mortgages remain an important part of this picture. According to ooba Home Loans, the share of applications from first-time homebuyers for cost-inclusive loans has increased more than fivefold: from approximately 3% in 2021 to nearly 16% at the beginning of 2026.' He also added that 'the approval rate has also significantly increased, reaching 88.8% for cost-inclusive loans among first-time homebuyers during this period.'
