The outlook remains finely balanced as policymakers weigh their next move, with inflation at the upper end of the target range, the rand under persistent pressure from global uncertainty, and the MPC having already ended its three-year pause in May.
Image: File
The lowest interest rate in a generation was not the cheapest money in a generation.
In September 2020, prime sat at 7% - its lowest in decades. With inflation at 3.2%, the real cost of that debt was only 3.8%, says Prizm Property Partners.
The Durban-based real estate company says that by July 2022, prime had climbed to 9% and was still rising. “Debt felt expensive. Yet with inflation at 8%, the real cost of borrowing had dropped to just 1% - the cheapest in the entire period the chart covers.
“By February 2026, prime had eased to 10.25% off its recent peak. This felt like relief. But with inflation back at 3.2%, the real cost of debt stood at 7.1% - among the highest in the series.”
The company says this points to three turning points. It says that at each one, the nominal rate and the real cost of borrowing moved in opposite directions.
Treating the rate on the term sheet as the rate one is actually paying is one of the most expensive habits in South African property finance, it adds.
“The starkest example sits at the start of the series, and it carries a second lesson. In January 2004, the prime was 11.5% while headline inflation had collapsed to 0.4% - implying a real cost of debt above 11%, the highest on the chart. But that inflation reading was itself distorted.
“The rand had more than doubled off its 2001 crisis low, crushing imported-goods and fuel inflation; and the headline CPI of that era still included mortgage-bond interest, which the Reserve Bank's own rate cuts had just slashed-mechanically dragging the number toward zero.”
According to Prizm, the mortgage-stripped measure the bank actually targeted, inflation was nearer 4%, and the real cost of debt nearer 7% to 8%. Still high but not 11%.
Even the inflation figure subtracted has a composition one has to know before they trust it
“We plotted the full picture-prime rates, inflation, currency moves, tenant economics and equity conditions from 2004 to today, all sourced to SARB, Stats SA and the JSE. Toggle the real overlay on the rate panel, and the divergence becomes obvious.
"Which catches more underwriters right now-the 2020 'cheap money' that wasn't, or today's easing cycle that feels cheaper than it actually is?”
As the SARB meets again on the 23rd of July, most people will check the outcome the day after, but those making the smart decisions will be paying attention to what happens before, wrote David Ingle, the real estate principal for Seeff Bedfordview, Edenvale & Modderfontein.
He says that because the lead-up tells one almost as much as the decision itself.
“With inflation at the upper end of the target range, the rand still under pressure from global uncertainty, and the MPC having already broken its three-year pause in May, the outlook remains finely balanced as policymakers weigh their next move
And to be honest, another hold wouldn't surprise me, nor would another small hike.”
He says what he will watch instead is the tone, and whether the SARB signals this is a one-off response to global shocks, or the start of a longer cycle.
“That tone will shape buyer confidence far more than the number itself,” says Ingle.
Earlier in the week, Bianca Lakha, an equity analyst, said that when the Reserve Bank last met in May, it did something it had not done since 2023 and raised interest rates to 7%. She says the SARB caught most of the market off guard.
“On 23 July the committee meets again, and the decision is far harder than the headline numbers suggest. At first glance, a hike looks justified. Inflation has climbed for three months in a row and reached 4.5% in May, its highest level in nearly two years.
"But once you look under the bonnet, almost all of that increase is fuel: petrol is up close to 25% over the year and diesel by more than 50%, driven by the oil price and the conflict in the Middle East. Strip fuel out and inflation has barely shifted from 3.7% for a full year, while food has actually been getting cheaper.”
According to Lakha, that leaves the Bank facing an uncomfortable and familiar question. “Do you raise rates to fight a supply shock you did not cause and cannot fix?
Higher rates will do nothing for the price of diesel, but they can stop a one-off shock from bleeding into wages and expectations over time. That is the tightrope Governor (Lesetja) Kganyago is walking, and it is why he keeps coming back to the risk of second-round effects.”
The much-desired rate cut that many households were counting on has not disappeared
The equity analyst said her base case is that the Bank holds, but it will be a nervous hold rather than a comfortable one.
She added that for the rest of them, the message is reassuring enough. “The rate cut that so many households were counting on has not disappeared. It is simply waiting out a barrel of oil.”