The decision in September to keep South Africa’s repo rate unchanged at 7.00%, marks a pause after a series of five cuts over the past year that has put disposable expenditure of more than R1 500 into the pockets of homeowners with variable-rate mortgages in the R2 million range.
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This decision means the prime lending rate will stay at 10.50%. For homeowners, the period of rapid relief may have taken a breather, but property experts are urging a disciplined financial strategy that could translate the recent gains into monumental long-term savings.
Since September 2024, the Monetary Policy Committee (MPC) has delivered a cumulative 125 basis point cut, slashing the repo rate from 8.25% to 7.00%.
For homeowners with a R2 million variable-rate bond, this has decreased their monthly instalment by more than R1 600. However, Cobus Odendaal, CEO of Lew Geffen Sotheby’s International Realty in Craighall and Randburg, warns that this extra cash should not be seen “mad money”.
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The instinct for many is to breathe a sigh of relief and absorb that R1 600 back into their monthly household budget for other expenses,” says Odendaal. “But that would be a significant missed opportunity.
“Unfortunately, the financially astute move is to pretend the rate cuts never happened.”
Odendaal advocates for homeowners to continue paying their original instalment, calculated at last year’s prime rate of 11.75%.
“If you set a household budget last year and made it through the month without that extra cash, then stick to it. By continuing to pay your old, higher instalment - around R21 675 on a R2 million bond - you are effectively paying a massive amount off your capital balance every single month,” he explained.
The numbers, he says, are staggering. On a standard 20-year loan, this discipline would allow a homeowner to own their house free and clear approximately four years sooner and would slash off more than R650 000 from the total interest paid over the life of the bond.
“For even the most financially untrained among us, those numbers are a no-brainer. It’s the easiest R650,000 you will ever save,” Odendaal stated.
Understanding your bond: Fixed vs. variable rates
The strategy of paying extra is exclusively useful to those on a variable interest rate bond, which has been the favourable choice during this cutting cycle.
“It’s crucial for buyers to understand the difference between the two main bond types,” says Odendaal:
- Variable interest rate: This rate fluctuates directly with the South African Reserve Bank’s repo rate. When the repo rate is cut (or increased), your bank’s prime lending rate follows, and your monthly bond repayment changes accordingly. This means you immediately benefit from rate cuts but are also exposed to future hikes.
- Fixed interest rate: The interest rate is locked in for an agreed-upon period (usually 1-5 years), regardless of whether the national repo rate goes up or down. This provides certainty for budgeting but means you will not benefit from any rate cuts during the fixed term.
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“When rates are falling significantly, as they have been, variable-rate loans typically offer much better value as you automatically benefit from each cut,” Odendaal noted.
“Given the fact that the MPC has put the brakes on another cut given the uncertainty over South Africa’s export market with the new US trade tariffs, paying what was a stretch last year, will offer more of a buffer if the rates rise again.”
Odendaal says despite the repo rate remaining the same this month, the property market has been rebounding as investors realise the safety and stability of real estate as measured against other less secure investments.
“For existing homeowners with variable bonds, the message is clear: use this pause as a chance to get ahead, and for those entering the market, understanding your bond type is the first step to long-term financial health.”
What smart buyers and investors should do
This is a window for preparation, not celebration.
“If you're buying your first home, pay down revolving debt. Save towards a deposit – 10% remains a powerful signal to lenders. Make sure your income is documented and get prequalified before you start viewing,” says Paul Stevens, CEO of Just Property.
Use this simple yardstick: on a R1.6 million bond over 20 years at prime, a 25 basis point move changes your repayment by about R270/month. A 50bp change = R540. A full percentage point = R1,060. Stress-test your affordability now – not after rates move.
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Investors should avoid over-leveraging in the hope of a future rate cut. Test deals at current rates and ensure the rent covers the bond, levies, rates, and a reserve for maintenance and vacancies, Stevens advises.
Opportunities exist where listings have lingered or light renovations can boost returns. In suburbs seeing additions and alterations, stock may tighten, supporting well-priced homes.
“Stability isn’t the finish line. It’s a planning window. Whether you’re buying your first home or expanding your portfolio, this is the time to plan smart, act confidently, and be offer-ready when the right opportunity appears,” Stevens says.
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