How a Small Rate Cut Can Build Big Long-Term Savings

The South African Reserve Bank cut interest rates by 0.25 percentage points this week, and for households with home loans the relief is immediate.

A first-time buyer with a R1.25 million bond at a typical interest rate of about 10.5% will see their required monthly repayment fall by between R200 and R230. It may not feel dramatic, but the long-term impact can be significant if you use it wisely.

On a typical twenty-year home loan of R1.25 million, with the rate falling from 10.5% to 10.25%, carrying on with the old instalment can result in big changes down the line. Keeping the higher instalment shortens the bond by around one year and saves roughly R100 000 in interest over the life of the loan. That is a substantial return for a habit that requires no new money and no lifestyle change.

There is also a reasonable chance of more rate cuts in 2026 if inflation remains steady. If that happens, households could see further reductions in their required repayments.