How lower interest rates can unlock your dream home

In May 2025, Reserve Bank Governor Lesetja Kganyago announced a 0.25% cut to the repo rate, lowering the prime lending rate to 10.75%, depending on individual risk profiles. Supported by easing inflation and a stronger rand, this reduction offers meaningful financial relief to both prospective buyers and current homeowners.

The property market is now showing signs of change with a blend of timing, affordability, and lifestyle factors that make homeownership more accessible than before. With interest rates easing, many South Africans are reconsidering their options. Now could be the perfect moment to take the step towards owning the home you’ve been dreaming of.

Why the rate cut matters

The announcement comes at a time when the economy is facing modest growth. The Reserve Bank has revised this year’s GDP forecast to 1.2%, slightly below the Treasury’s earlier estimate of 1.4%. This rate drop indicates increased confidence that inflation is under control, which is a good indicator for buyers considering a bond.

There’s also discussion around adjusting the inflation target itself. Governor Kganyago has hinted at a fixed target of 3%, which would replace the current range of 3% to 6%. A more focused target could support longer-term stability in borrowing costs.

For those with home loans, even a small reduction in the interest rate can make a noticeable difference. On a R1 million loan over 20 years, monthly repayments may drop by more than R2,000. For smaller loans, such as car finance, the savings still add up over time. This increased affordability gives buyers more room to manoeuvre.

Rethinking what’s possible

A lower interest rate can expand your options when it comes to choosing a home. That extra room in your monthly budget might allow you to aim for a location or property that previously felt just out of reach.

There is more to Cape Town's desirable areas than just distinction, from the beaches of Clifton to the vineyards of Constantia and the bustle of the V&A Waterfront. They offer a way of life that combines natural beauty, top schools, and vibrant culture. For some buyers, this is the opportunity to access those communities without overextending financially.

Investing in comfort and personalisation

For current homeowners, the drop in interest rates also frees up cash that can be reinvested in the home. Whether it's upgrading to a custom kitchen, installing solar panels, or enhancing outdoor living areas, these improvements can transform how you live.

These improvements could have appeared extravagant in a more costly loan environment. Reduced repayments, however, make them feasible and useful methods of enhancing comfort and long-term value.

Second homes on the radar again

Lower rates are also reviving interest in second properties. Whether it’s a beach house in Hermanus, a holiday spot in Plettenberg Bay, or a quiet escape in the Winelands, the appeal of a second home is growing.

These properties offer more than leisure. Many owners are exploring short-term rentals as a way to generate additional income. This type of investing is more accessible as borrowing rates are lower, lowering the financial entry point.

A time for informed decisions

Although lifestyle is a powerful incentive, it's important to keep in mind that luxury real estate in prestigious locations often retains its value. In fact, in periods of uncertainty, it frequently outperforms the whole market.

Buyers have an opportunity to enter or grow within this category on attractive terms due to the current reduced interest rate environment. At this point, the lifestyle appeal is equally as compelling as the stats.

Knight Frank’s global insights consistently show that luxury real estate aligned with lifestyle trends continues to attract discerning buyers. Security, access to nature, and proximity to amenities remain key.

Don’t miss the opportunity

The mix of reduced interest rates, steady inflation, and a stronger currency provides a unique opportunity. Not only is affordability important, but so is what that affordability enables you to accomplish, such as buying, investing, or adding more properties to your portfolio.

If you've been waiting for the ideal time to invest in a new property, now may be it. Knight Frank is available to assist you in taking full advantage of the market's potential to move ahead with confidence.