Reserve Bank Surprises With Rate Hold At 7%

The announcement comes amid subdued economic activity and persistent geopolitical uncertainty, although the Reserve Bank has taken a more positive view of the inflation outlook and modestly improved its 2026 growth forecast.

The inflation forecast for this year was lowered to 4.0% from 4.4% previously and the economic growth forecast lifted to 1.4% from 1.2%.

Mamello Matikinca-Ngwenya, FNB chief economist says, "The MPC’s decision to keep the repo rate unchanged reflected a careful balancing of weak growth against inflation risks that have moderated since the previous meeting.

"Domestic activity remained subdued, with real GDP growth expected to improve only gradually from 1.1% in 2025 to around 1.2% in 2026, before strengthening to about 2.0% by 2028.

“Recent business and activity indicators continue to point to a soft domestic economy, with confidence weighed down by higher operating costs and still-tight financial conditions."

Matikinca-Ngwenya highlights that importantly, the inflation risk profile has become less acute. “Oil prices had eased from recent elevated levels, reducing some of the external pressure on the inflation outlook, while the absence of a further material shock gave the MPC room to pause rather than tighten further.

"Although inflation expectations remained above levels consistent with the new objective and geopolitical uncertainty in the Middle East continued to pose upside risks to energy prices, these risks appeared more contained than at the previous meeting.

"As a result, keeping rates unchanged struck a balance between supporting a fragile growth environment and preserving the credibility of the transition towards a lower inflation target," she adds.

Holding buys time

While a hold was certainly not what the market had forecast, Craig Mott, national sales manager for the Rawson Property Group says it’s not altogether a bad thing.

"What hurts the market isn't a particular rate, it's uncertainty," he explains. "When people don't know what's coming, they wait. A steady hand from the Reserve Bank, even at a slightly higher level, gives everyone room to make decisions again."

"The thing to watch isn't South African growth or spending – it's whether those outside forces settle. If fuel softens over the coming months, the door to a cut opens later in the year," says Leonard Kondowe, national manager for Rawson Finance.

"The Bank moved in May to get ahead of it, and holding now buys time to see whether those pressures ease. That distinction matters for anyone watching for the next move."

Stability brings certainty

Samuel Seeff, chairman of the Seeff Property group says the unchanged repo rate avoids further shocks to consumers and the economy because it is supported by underlying economic indicators including an improved inflation outlook despite the recent spike to 5%, a lower oil price compared to May, and the strength of the Rand.

"Hopefully the economy can start getting back on track," he says. "We cannot afford a continuation of the economic stagnation and risk more job losses."

Sarb's decision provides some short-term stability for homeowners and prospective buyers, says Adrian Goslett, chief executive officer and regional director of ReMax Southern Africa.

"Many homeowners and prospective buyers will undoubtedly welcome the decision to leave interest rates unchanged. While holding rates steady won't reduce bond repayments, it does provide households with greater certainty at a time when many are carefully managing their finances.

"Opting to keep interest rates unchanged suggests that the Reserve Bank is taking a measured approach. While inflation risks remain, the Sarb has also recognised the importance of not placing unnecessary additional pressure on consumers and businesses unless circumstances require it,” explains Goslett.

"For prospective home buyers, the decision means borrowing costs remain unchanged, allowing them to continue planning with greater confidence."

Financial resilience matters

However, Goslett cautions buyers against assuming that interest rates will remain at current levels indefinitely.

"Anyone looking to purchase property should continue buying within their means and ensure that they leave enough room in their budget for unexpected expenses or future interest-rate movements." He adds that existing homeowners should use this period of stability to strengthen their financial position where possible.

"If your budget allows, consider paying a little extra into your home loan each month. Even small additional repayments can make a meaningful difference while also creating a buffer should borrowing costs increase in future."

House prices accelerate

Despite still-elevated borrowing costs, South Africa’s residential property market has continued to show resilience, supported by improving confidence, sustained buyer demand, and strong regional performance.

According to Andrew Golding, chief executive of the Pam Golding Property group, the market continues to demonstrate healthy capital appreciation, with national house price inflation (HPI) accelerating to 5.1% in June and averaging 4.8% during the first half of 2026.

This represents the strongest national house price growth since the post-pandemic rebound in 2021, when HPI averaged 5.5%.

According to the Pam Golding Residential Property Index, the Western Cape continues to outperform by an increasing margin, averaging 10.3% during the first half of 2026, well ahead of Gauteng (3.0%) and KwaZulu-Natal (2.8%).

Interestingly, coastal house price inflation has stabilised at approximately 5% during H1 2026, while growth in non-coastal house prices has continued to accelerate, reaching 5.4% in June and outperforming coastal HPI for the fourth consecutive month.

The gap between freehold and sectional-title house price inflation also continues to narrow, with freehold price growth increasing to 6.3% in June, while sectional title HPI accelerated to 4.9%.

Among the major metropolitan markets, Cape Town once again led the country in H1 2026, with average house price inflation of 11.1%, followed by Ekurhuleni at 5.0%.