Reserve Bank lifts repo rate to 7.25% as another hike lands on household budgets

The Reserve Bank has raised interest rates by 25 basis points, taking the repurchase rate to 7.25% and the prime lending rate to 10.75%. It is the second increase of 2026.

As eNCA reported on 23 September 2026, the decision lands against renewed inflation pressure, higher oil prices and August consumer inflation of 4.4%. That inflation figure is the one that matters most to the rate-setting decision, because the Reserve Bank’s mandate is to keep consumer price growth inside its target range.

What a quarter point costs

On a R1-million bond, a 25-basis-point increase adds about R170 to the monthly repayment. On a R3-million bond it adds around R500. On a R5-million bond it adds roughly R840. Those estimates come from eNCA’s Number of the Day segment, presented by Francis Herd.

The figures are estimates of the repayment change on variable-rate debt and will differ by lender, loan term and the balance outstanding. What they show is the shape of the pressure. The increase does not arrive as a percentage on a statement. It arrives as a larger debit order on the same salary.

Prime is the benchmark banks use to price credit. When it moves, home loans, vehicle finance, credit cards and overdrafts tied to it typically reprice within a month or two, depending on the contract. A household with a bond and a car financed at prime absorbs the increase twice.

Why the Reserve Bank does this

The mechanism is deliberate. Higher repayments leave households with less disposable income, which reduces spending and can help cool inflation. The pressure on borrowers is not an accidental side effect. It is the transmission channel.

The trade-off is uncomfortable on both sides. Leaving inflation unchecked erodes purchasing power across the economy, including for people with little or no debt. When fuel and other input costs rise, those pressures spread through transport, production and retail prices.

Part of the current inflation pressure originates outside South Africa. Local interest rates cannot lower the international oil price or end a geopolitical shock. They can try to stop those shocks from feeding into a wider cycle of rising prices and expectations.

The growth problem underneath the rate decision

The economy absorbing this increase is not growing quickly. Projected annual growth is 1.2%, only marginally above last year’s 1.1%.

That matters because stronger growth gives households and businesses more capacity to withstand tighter financial conditions. Companies expanding into a growing economy have more reason to invest and hire. Workers have a better chance of seeing income and employment opportunities improve.

When growth is weak, higher borrowing costs land in an economy already struggling to generate momentum. Monetary policy can influence inflation and demand. It cannot by itself produce the structural conditions required for sustained growth and job creation.

The rate debate will not end with whether the Reserve Bank should raise, hold or cut. The bigger test is whether the economy can grow fast enough that the next shock does not travel so quickly from a policy decision into a household budget.

Source: eNCA, Number Of The Day | 25 | 23 September 2026.