SARB cuts interest rates
The repo rate has been lowered to 7.5%.
The SARB‘s monetary policy committee (MPC) announced today that they’ve decided to cut rates by another 100 basis points.
This is the fifth consecutive cut to the repo rate. The repo rate has been lowered by a total of 450 basis points, after peaking at 12%, in June 2008.
What does this mean?
The latest interest rate cut brings the prime interest rate down to 11%.
This will significantly lower the financial pressure that many South Africans are currently under.
Up till now, the monthly installment for someone with a with a R1,000,000 homeloan, payable over 20 years, at an interest rate of prime minus 1%, was about R10,355.
Next month his monthly installment will drop to about R9,677. This amounts to a saving of R678 per month.
If you want to see how your own loan payments will change, you can use the loan payment calculator to find out.
Investment strategy
I expect two or three more rate cuts this year, but I think the SARB will be more conservative from here on (they’ll probably only cut by 50 basis points the next time).
If you have debt, now is a golden opportunity for you to use the additional money you’ll have each month to pay off your debts quicker.
If you currently have most of your investments stashed in cash (savings accounts, money market, bonds, etc.), it is probably time to move some of your investments to equities (i.e. shares or unit trusts).
Share prices are much lower now than they were at the end of 2007 and interest rate cuts are usually good for business. Companies have easier access to funding, and their customers have more money available to spend on their products.
May 29th, 2009 at 09:24 pm
HELLO FRANCOIS!!!
It’s your long lost friend from America!!! I saw your comment from May 8th on my blog. Yes, I took a break from blogging to try to finish up my degree. After 8 and a half years, I finally graduated this past Sunday. I am thanking God that it is over and that my family didn’t go insane or kill me during the whole process.
Nicholas is doing alright. He is not able to go to school much so now that I am finished with my classes, I took the rest of the school year off from my job to be home with him. He has been having a little dificulty keeping up with his studies so I will help him do that. He continues to have issues with his lung function, but he is still marching on. He is a strong kid.
Everyone else is doing well and I hope you are. I hae glanced through yoru blog here and it looks as though you are as busy as ever. It also looks as though your country is still having financial issues as our country is too. Sometimes I wish I could move to Australia and take up with the Aboriginal people.
Just kidding. This country is a mess so all we can do is pray for it…ya know?
ANYWHO, I’ll stop rambling. I can’t promise aobut the blogging getting back into full swing, but I am definitely going to put more effort into it. Thanks for checking up on me. Keep in touch – if not through the blog, through email. K? See ya!
May 29th, 2009 at 09:37 pm
Lord have mercy – don’t look at my spelling mistakes!! I didn’t proofread! UGH!!!