Rate Cuts Boost Savings, Drive Housing Demand

Source: Supplied. Rhys Dyer, chief executive officer of the ooba Group.

This was the sentiment of Rhys Dyer, chief executive officer of the ooba Group who welcomed the announcement by the South African Reserve Bank’s (Sarb) that it would cut repo and prime lending rates by 25-basis points for a second consecutive time.

Now at 7% and 10.50% respectively, borrowing costs are officially 1.25% lower than they were a year ago, a welcomed result that Dyer believes will continue to support homebuyers and homebuying activity.

“At the current prime lending rate of 10.50%, the monthly repayment on a home priced at our Q2 ‘25 average approved bond size of R1,455,712 equates to R14,534 over 20 years - down from R15,776 just a year ago. Savings like these add up to almost R15,000 extra in a homeowner’s pocket over the course of a year.”

Confidence trumps deposits

Dyer adds that consumers’ improved affordability is reflected in ooba Home Loans’ latest figures.

“In Q2 ’25 we saw an 11% year-on-year increase in home-loan applications and a 18.5% increase in the total value of these applications,” he shares. “This points to ongoing market recovery, increased buying power and growing buyer confidence.”

Interestingly though, deposits - a key indicator of consumer liquidity - have drifted lower, down by 13.5% year-on-year for the average homebuyer and 1.9% for first-time homebuyers (as at Q2 ‘25).

“We do however believe that these figures are reinforced by strong bank lending activity, including attractive incentives like zero-deposit loans and some of the highest discounts to the prime lending rate seen in years,” says Dyer, highlighting an average interest rate of prime less 0.67% for its customers in Q2 ‘25 – a 0.11% reduction year-on-year.

Outlook supports cuts

While the country has five rate cuts under its belt since September 2024, Dyer believes that there is still scope for a further reduction.

“Today’s news is certainly welcomed by the residential property sector,” he says. “As it stands, South Africa’s economic outlook provides room for monetary easing. Inflation remains anchored at the lowest levels seen in four years (currently 3%) and the country has benefitted from a series of petrol price cuts, with another anticipated in August.”

And despite global uncertainty, Dyer believes that the demand for homes will build in light of the repo and prime lending-rate cut and the prospect of a stable, lower interest-rate environment.

“The market has responded positively this year – even in the face of trade-policy volatility – and we expect this to continue.”

Fuelling the positive momentum is news of a second consecutive year of real salary growth, with increases of 5% to 6% outpacing last year’s inflation rate of 4.4% and the projected 3.5% for this year.

“This is reflected not only in the higher value of home-loan applications in Q2 ‘25, but also in our January -June 2025 salary data, which shows year-on-year growth in excess of inflation in average monthly gross income across four of the nine regional housing markets.”

Cautious buyer comeback

But the question remains, will rate cuts further entice first-time homebuyers? Fuelled by recent rate cuts, first-time homebuyers are making a cautious but steady return to the market.

“While this segment has only experienced marginal year-on-year growth in Q2 ‘25 - up just 1% to 46% - it is spending 3.5% more on homes year-on-year,” shares Dyer.

Notably, first-time homebuyers appear to be more financially prepared than in the past.

“In Q2 ‘25, the average deposit rose to 10.4%, a significant increase compared to Q2 ‘20 at 8.45%. This indicates that they are prioritising savings and are actively taking steps to pay down their home loans.”

For those struggling to save, the good news is that the banks are stepping in. “In Q2 ‘25, 59% of first-time homebuyers secured a home without a deposit, while 10.5% purchased a home without a deposit or access to funds for transfer and bond costs,” says Dyer.

Reflecting on whether this group could return to their May 2020 peak, Dyer remains measured. “That surge was driven by a record-low 7% interest rate - a level that we’re unlikely to see again anytime soon.”