Prime rate explained: what it means for your monthly repayment

You’ll hear the “prime rate” mentioned constantly when buying a home — but what is it, and how does it affect what you pay each month?

What prime actually is

The prime lending rate is the benchmark banks use to price loans to the public. It is linked directly to the Reserve Bank’s repo rate — the rate at which the Reserve Bank lends to the commercial banks — and since 2001 the gap between the two has been fixed at 3.5%. As at mid-2026 the repo rate is 7.00%, which puts prime at 10.5%.

Your rate is prime, plus or minus a margin

Your personal home loan rate isn’t simply prime. The bank adds or subtracts a margin based on how much of a risk it considers you to be — your credit record, deposit and overall financial profile. A strong applicant might be offered prime less 0.5%, while a higher-risk applicant might be offered prime plus 1% or more.

How a rate change hits your repayment

Most home loans in South Africa are variable, meaning your rate moves when prime moves. The Reserve Bank’s Monetary Policy Committee reviews rates roughly six times a year. When prime rises, your monthly repayment rises; when it falls, you pay less. On a R1 million bond, even a 0.5% move changes your repayment by a few hundred rand a month — and far more over the life of the loan.

Fixed vs variable

Some banks offer a fixed rate for one to five years, giving you certainty, but fixed rates usually start higher than the prevailing variable rate. Which suits you depends on your appetite for certainty versus cost.

The takeaway

You can’t control prime, but you can influence your margin — and the single best way to secure a competitive margin is to let several banks compete for your bond. That’s what a bond originator does for you.