Here's How The Interest Rate Hike Will Affect Your Car And Homeloan Payments

The South African Reserve Bank’s Monetary Policy Committee (SARB MPC) has raised the repo rate by 25 basis points. This will see the prime lending rate rise by 0.25% to 10.75%.

In announcing the decision, SARB Governor Lesetja Kganyago said that, with fuel prices rising, headline inflation was projected to hit 5% before slowing to 3% at the end of 2027.

Earlier on Thursday, Stats SA announced that South Africa’s inflation rate had edged higher to 4.4% in August, from 4.3% in July. While consumer prices were largely unchanged during the month, fuel price hikes in September and October are expected to have an impact on the inflation outlook.

FNB Chief Economist Mamello Matikinca-Ngwenya said: “The MPC’s decision to raise the repo rate by 25bps reflects the need to reinforce policy credibility at a time when external inflation risks have intensified and inflation expectations remain above the SARB’s 3% objective.”

But how will the 0.25% prime lending rate hike affect your car and home loan payments?

Car payments

According to our calculations, on a R250,000 vehicle loan, the payment will increase by R32 per month. The increase will be R64 on a R500,000 loan and R127 on a R1 million loan. These projections are based on a six-year, deposit-free term calculated at prime.

Assuming you’ve just taken out the loan, the 25bp hike will add R2,292 to your interest bill over the six years on a R250,000 car and R4,583 on a R500,000 vehicle.

Home payments

If you have an R800,000 home loan at prime over 20 years, you can expect your monthly instalment to increase by around R135. Those with R1.5 million home loans, close to South Africa’s average home price, will pay around R253 more, while those with a R3 million loan will need to find an extra R505.

The extra interest cost over the loan duration will be in the region of R32,350 for an R800,000 loan, rising to R60,657 for an R1.5 million debt and R101,094 for the R2.5 million example.

Punishing consumers

Samuel Seeff, chairman of the Seeff Property Group, feels the interest rate hike will do little to mitigate external cost shocks but will inflict real financial pain on households and businesses.

“We had hoped that the Bank would look past short-term spikes and focus on protecting long-term economic stability. The current inflationary spike is driven by temporary factors such as oil prices rather than runaway domestic demand,” Seeff said.

He said the move would unnecessarily punish already overburdened consumers and will dampen economic and property market activity.

“Household budgets are already stretched following the May rate hike and other cost increases. Monthly bond repayments will now increase further, risking home loan defaults and heightening the affordability challenges experienced by first-time buyers,” Seeff said.

However, FNB says the latest rate hike does not necessarily signal the start of a prolonged tightening cycle.

“Economic growth remains subdued, unemployment remains elevated and consumers continue to feel the impact of higher living costs,” said FNB CEO Lytania Johnson.

“While today’s decision may be challenging for many households and businesses, managing inflation risks remains critical for protecting purchasing power and supporting long-term economic confidence,” Johnson added.

Buyers looking for cost-inclusive loans

Dr Andrew Golding, chief executive of the Pam Golding Property Group, said that while the higher rate will inevitably place some additional pressure on prospective homeowners, particularly first-time buyers who remain more sensitive to monthly repayments, banks are continuing to support housing-market activity through competitive lending and products designed to reduce the upfront financial barriers to homeownership.

“Zero-deposit and cost-inclusive home loans remain an important part of this picture. According to ooba Home Loans, the proportion of first-time buyer applications for cost-inclusive loans increased more than fivefold, from around 3% in 2021 to nearly 16% in early 2026,” Golding said.

“Approval rates have also risen significantly, reaching 88.8% for cost-inclusive loans among first-time buyers during this period.”

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* The calculations above are intended as a rough guide only. Actual repayments and interest costs will vary depending on the loan amount, term, interest rate and individual lender terms.

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