Here's how the interest rate hike will affect your car and home loan repayments

The South African Reserve Bank's Monetary Policy Committee recently increased the repo rate by 25 basis points, resulting in a prime lending rate increase to 10.75%. Governor Lesetja Kganyago stated that headline inflation is projected to reach 5% before moderating to 3% by the end of 2027. Stats SA reported that South Africa's inflation rate rose to 4.4% in August from 4.3% in July.

FNB Chief Economist Mamello Matikinca-Ngwenya explained that the decision reflects the need to maintain policy credibility amid intensified external inflation risks and expectations above the SARB's 3% objective. The 0.25% prime lending rate hike will impact car and home loan repayments. For a R250,000 vehicle loan, monthly payments will rise by R32, reaching R127 on a R1 million loan.

These projections are based on a six-year, deposit-free term at prime. Home loan borrowers with R800,000 at prime over 20 years can expect a monthly instalment increase of around R135, while those with R1.5 million will pay approximately R253 more. Samuel Seeff, chairman of the Seeff Property Group, believes the interest rate hike will cause financial strain for households and businesses as it exacerbates already burdened consumer budgets and may lead to home loan defaults and affordability challenges for first-time buyers.

FNB CEO Lytania Johnson emphasized that while the decision may be challenging for many, managing inflation risks remains crucial for protecting purchasing power and long-term economic confidence. Dr Andrew Golding, CEO of Pam Golding Property Group, noted that while the higher rate will place some additional pressure on homeowners, especially first-time buyers, banks continue to support the housing market through competitive lending and cost-inclusive products.