South Africans with car loans have reason to breathe a little easier this week, after the Reserve Bank chose to keep borrowing costs exactly where they were, sparing motorists and other credit holders from any fresh increase in repayments.
Key Takeaways
- No rate hike: the SARB left the repo rate at 7% and the prime lending rate at 10.50%, meaning car loan and other credit repayments stay the same for now.
- Inflation is rising but expected to ease: headline inflation reached 5% in June, its highest since 2024, driven mainly by fuel prices, though it should stay above 4% only until early next year.
- Growth depends on reform: the Reserve Bank expects a recovery in the second half of the year, but says lasting improvement hinges on domestic reforms in areas like energy, transport and local government.
About Arcadia Finance
Get your loan sorted with ease through Arcadia Finance. Pay no application fees and choose from 19 trusted lenders, all fully compliant with South Africa’s National Credit Regulator standards. Enjoy a simple process and reliable options built around your financial needs.
Repo Rate and Prime Lending Rate Left Unchanged
The South African Reserve Bank (SARB) has opted to leave both the repo rate and the prime lending rate untouched, at 7% and 10.50% respectively, a decision that brings welcome relief to South African motorists looking to buy a vehicle on credit.
The repo rate is the interest rate at which the Reserve Bank lends money to commercial banks. When it stays flat, banks generally have no reason to raise the interest they charge customers, which is why car loans, home loans and other credit products tend to remain stable too.
Reserve Bank Governor Lesetja Kganyago revealed the decision, which received the support of four members of the Monetary Policy Committee (MPC), on Thursday, 23 July.
Kganyago went on to say that the committee had agreed that, despite the uncertain outlook, the rate hike implemented at the previous meeting meant that the current policy stance remains suitable for now, with interest rates still sitting at a somewhat restrictive level.
Committee Decision and Economic Outlook
South Africa’s growth during the first quarter came in stronger than had been anticipated, although the MPC is bracing for continued sluggish growth across the second and third quarters of the year.
Consumer confidence has dropped considerably, and business confidence has likewise softened. Data broken down by sector points to generally reduced activity since the outbreak of the war, according to the governor.
South Africa’s Monetary Policy Committee typically meets six times a year to review the repo rate, usually every two months, so the next scheduled decision would fall towards the end of September.
- Repo rate held at 7%
- Prime lending rate held at 10.50%
- First-quarter growth exceeded expectations
- Consumer and business confidence both declined
Growth Concerns Amid Global Uncertainty
Prices for South Africa’s export commodities have also declined, while the country’s terms of trade have improved somewhat, thanks to cheaper import prices flowing into South Africa.
Kganyago pointed out that the year had begun with strong momentum carried over from the previous year, although households subsequently felt the pinch of rising fuel prices, which in turn stirred up uncertainty around investment.
He explained, however, that domestic reforms have the potential to steer the local economy onto a stronger growth trajectory, particularly as global conditions start to settle down.
The Reserve Bank’s baseline forecast anticipates that the economy will begin recovering in the second half of the year, once the current shock subsides, although the outlook remains uncertain and downside risks to growth persist.
Stabilising Fuel Prices Affect Inflation
On Wednesday, 22 July, the day before the MPC convened to vote on the repo and lending rates, Statistics South Africa (Stats SA) revealed that the inflation rate had climbed to 5% in June, its highest level since 2024.
The Reserve Bank Governor attributed this increase to elevated fuel prices, driven by the renewed conflicts in the Middle East.
He noted that petrol and diesel prices had eased during the month, although global oil prices have since climbed once again, and that headline inflation is expected to remain above 4% until early next year.
Beyond fuel, the prices of goods have stayed relatively steady, while the exchange rate has proven resilient, with the rand trading close to where it began the year against the US dollar and gaining ground against the Euro.
| Indicator | Latest Figure | Context |
|---|---|---|
| Repo rate | 7% | Unchanged at this meeting |
| Prime lending rate | 10.50% | Unchanged at this meeting |
| Headline inflation (June) | 5% | Highest since 2024 |
| Inflation target | 3% (over time) | SARB’s long-term goal |
Food Inflation and Exchange Rate
Food inflation, another significant factor affecting South African households, has slowed, reflecting good harvests along with the fading impact of the foot-and-mouth disease outbreak.
Kganyago cautioned that El Niño could begin affecting food supply next year, describing this as a risk factor rather than something built into the Reserve Bank’s baseline forecast.
El Niño is a climate pattern linked to warmer sea surface temperatures in the Pacific Ocean, and in Southern Africa it has historically been associated with drier conditions and reduced crop yields, which can push food prices higher.
He reiterated that, although the inflation outlook has shown a slight improvement, it remains too elevated, largely because of slow economic growth.
The Reserve Bank is setting policy with the aim of achieving 3% inflation over time, ensuring that the current supply shock does not allow inflation expectations to become de-anchored.
At the same time, Kganyago acknowledged that South Africa’s growth prospects will be shaped mainly by domestic reforms rather than by monetary policy alone.
Reform-Driven Growth Prospects
These reforms include structural interventions such as fixing local government and improving productivity within network sectors, including transport and energy.
Kganyago explained that this also encompasses the macroeconomic goals of sustainable debt levels and permanently lower inflation.
- Fixing local government structures
- Improving productivity in transport
- Improving productivity in energy
- Maintaining sustainable debt levels
- Achieving permanently lower inflation
The Reserve Bank’s main contribution, he concluded, is to stabilise inflation in line with its 3% target over time, and the MPC will act as necessary to achieve that objective.
Conclusion
The SARB’s decision to hold both the repo rate and the prime lending rate steady offers a measure of breathing room for South African households and car buyers alike, even as inflation, fuel prices and global uncertainty continue to weigh on the broader economic outlook. With growth expected to gradually recover in the second half of the year and domestic reforms positioned as the key driver of longer-term stability, the coming months will test whether these structural changes can take hold quickly enough to ease the pressure that consumers and businesses have felt throughout 2026.
Fast, uncomplicated, and trustworthy loan comparisons
At Arcadia Finance, you can compare loan offers from multiple lenders with no obligation and free of charge. Get a clear overview of your options and choose the best deal for you.
Fill out our form today to easily compare interest rates from 19 banks and find the right loan for you.
