Guiding consumers since 2009

Interest rate cut by one percent

By Staff Writer

The South African Reserve Banks Monetary Policy Committee (MPC) has been meeting Wednesday 27th and Thursday 28th of May 2009. The MPC determines the interest rate at which the Reserve Bank lends to the commercial banks. They have reduced the rate by 100 basis points. There has been a bunch of bad economic data recently, with inflation not falling and the economy entering a recession there have been calls to cut the rate. The major effect of a rate cut will be felt in your home loan and this is it will save you on a 20 year bond

 

  • R500 000 home loan = R 344.49 a month in savings
  • R750 000 home loan = R 516.74 a month in savings
  • R1 000 000 home loan = R 688.98 a month in savings

 

There have been calls in the financial press for cuts of between 50 basis points and 150. The rate itself was cut by 100 basis points, or one percent, in the end. The general prediction was for 100 basis points or 1%. The analysts got it right! The Reserve Bank has been pursuing a policy of inflation targeting and while consumer inflation was steady at 8.4% Producer inflation was down by 2.9% April 2008 to April 2009. So it's not as bad as it could be. The Reserve Bank has so far followed a calm and prudent policy without too many shocks and this policy has sensibly been continued today.

The Reserve Bank may now end its policy of inflation targeting, but a massive cut in interest rates can lead to our currency getting devalued by speculators. Also it seems that credit extension is still growing which means that the rate cuts that have already happened are starting to take effect and that the banks are still increasing lending even if it is not at the levels seen in December 2008. Inflation is expected to hit its target band of 3% - 6% towards the end of this year and the beginning of 2010 but there have been some calls to change the target band upwards by one percent making a more realistic target that we are more likely to be able to hit.

 

Recent Articles

Featured What’s the deal with underwriting?

When you apply for a long-term insurance policy, a financial adviser will ask some personal questions about your lifestyle, family history, health, and even ask you to take some medical tests. This process is called underwriting, but is it really necessary?

 

How are you taxed on your retrenchment package?

Unemployment is one of the biggest problems in South Africa. The emergence of the Covid-19 pandemic has exacerbated the situation with a lot of companies retrenching their employees.  When retrenched, you’ll receive a retrenchment package, but do you know how much tax you’re liable for?

Car repossessed – don’t be taken for a ride

When the country is facing an economic downturn, chances are your finances will feel the pinch. This can lead you to make bad financial decisions such as skipping your vehicle payments. But every decision has consequences and if you don’t pay your instalment, the bank will repossess your car. But what can you do when this happens?

 

Why you should consider gap cover

Your medical aid should protect you from incurring large medical bills when you’re sick. But what if your plan doesn’t cover the full cost of your medical expenses? We got in touch with insurance experts to find out whether gap cover is worth having.

Deals

Office furniture at discounted prices at BDK

Price: Available on request
When: Daily
Where: Johannesburg

Da Vincis Happy Hour Special

Price: Available on request
When: Daily
Where: Cape Town

Use your Absa card and get 30% cashback at Dis-chem

Price: Available on request
When: Daily
Where: Nationwide


Latest Guide

Guide to debt rehabilitation solutions