Repo rate cut sends positive signals for 2026
Repo rate cut sends positive signals for 2026
The South African Reserve Bank (SARB) ended the year on a positive note, announcing a further 25-basis-point cut to the repo rate, bringing it down to 6.75%, with the prime lending rate now at 10.25%. This marks the sixth rate cut since September 2024, and market analysts say the decision could deliver strong momentum into 2026. While modest, the cut provides meaningful relief and renewed confidence across the residential market, particularly for homeowners and first-time buyers.
What is the meaning of repo rate?
The repo rate is the interest rate at which a country's central bank, like the South African Reserve Bank (SARB), lends money to commercial banks. This rate is a key tool for managing inflation; if the repo rate rises, borrowing becomes more expensive, leading to higher interest rates for consumers on loans and potentially increasing returns on savings.
How the repo rate works
- For commercial banks: The SARB sets the repo rate, which is the cost for commercial banks to borrow money from the central bank.
- To influence the economy: The central bank adjusts the repo rate to manage inflation and keep it within a target range.
- For consumers: The repo rate directly affects the prime lending rate (the rate banks charge their most creditworthy customers), which then influences the interest rates on personal loans, home loans, and credit cards.
- If the repo rate goes up: Banks pass the increased cost of borrowing onto consumers, leading to higher interest rates on loans.
- If the repo rate goes down: Banks can offer lower interest rates, making loans more affordable and potentially increasing returns on savings accounts linked to the prime rate.
- Fixed vs. variable rates: The repo rate only directly impacts loans with variable interest rates, which change as the repo rate changes. Fixed-rate loans are not affected by fluctuations in the repo rate.
2026 Outlook
While another rate cut is not guaranteed in the short term, experts agree that buyer confidence is rising, affordability is improving, and sentiment is shifting. If inflation continues to stabilise and banks maintain their appetite to lend, 2026 may mark the beginning of a more active and sustainable phase for South Africa’s residential property market.