Money Desk
How the repo rate affects South African borrowing costs
Learn how the South African Reserve Bank repo rate influences the prime lending rate and impacts variable-rate loan repayments for South African consumers.
Banks announced a prime lending rate of 10.75%, effective from 25 September 2026, following the September 2026 repo rate decision. The repo rate was set at 7.25%, placing prime 3.5 percentage points above the rate. Borrowing linked to prime was therefore priced against the 10.75% benchmark from the effective date.
How Repo And Prime Connect
Commercial banks determine the prime lending rate by adding 3.5 percentage points to the repo rate. Any change in the repo rate therefore feeds into prime by the same number of percentage points, affecting borrowing priced against the prime benchmark.
How Rate Decisions Are Made
The South African Reserve Bank's Monetary Policy Committee meets six times a year to set the repo rate. Each meeting provides an opportunity to change the rate or leave it unchanged.
The Inflation Target Explained
The South African Reserve Bank targets inflation of 3%, with a tolerance band of one percentage point on either side. That places the permitted range between 2% and 4%.
In July 2025, the Monetary Policy Committee began aiming for inflation at the 3% floor, EWN reported. The target guides interest-rate decisions, including changes to the repo rate that feed into borrowing costs.
Maximum interest rates for some forms of household credit are set as margins above the repo rate. Credit facilities, including credit cards and overdrafts, may carry a maximum margin of 14 percentage points. For unsecured loans, the maximum margin is 21 percentage points.
| Measure or credit type | Rate or margin |
|---|---|
| Inflation target | 3% |
| Inflation tolerance band | 2% to 4% |
| Credit cards and overdrafts | Repo rate + 14 percentage points |
| Unsecured loans | Repo rate + 21 percentage points |
For households, the formulas mean the maximum permitted rate on these products moves with the repo rate. A one-percentage-point repo-rate change produces an equal one-percentage-point change in the resulting maximum rate, provided the applicable margin remains unchanged. Unsecured loans can carry a higher maximum margin than credit cards and overdrafts, making their permitted ceiling seven percentage points higher.
