Interest Rates cut by 100 basis points

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Interest rate cut by 100 basis points

The MPC (Monetary Policy Committee) has been meeting today and yesterday.

They announced that the new interest rate has been cut by 100 basis points

This new interest rate will come as welcome news to home owners and those with interest rate linked accounts.

It means that money has just got a bit cheaper to borrow and that it won't cost you as much to pay back any more.

Expectations for the cut varied from 50 basis points to 100 basis points. The major caution that Uncle Tito, The Guv, saw was that there could be a currency risk involved in cutting the interest rate too far too fast.

Business Report had an article stating that the rate cut would not affect the Rand. This was the opinion of interviewed economists from RMB Currency. They were of the opinion that with some many other countries already cutting their rates to zero or nearby, then we wouldn't really feel the difference if even a full 100 basis point cut was decided on. The size of the cut indicates how much the Reserve Bank intends cutting interest rates down to at the end of this cutting cycle. The cut of can be seen as an aggressive cut that signals a plunge to interest rates of around 7% at the end of this cycle.

The rand is not expected to suffer because of this as it is looking very strong at the moment.

iAfrica carried a version of this story, noting that the market has already discounted these expected rate cuts in.

The Times noted that the JSE was edging up in anticipation of the rate cuts this morning the 5th of February. Interest rate stock were apparently showing some signs of buying activity but the rest of the market was quite flat with not a lot of activity going on.

MyRoof.co.za blogged a call for a 100 basis point cut this morning, and were holding their breaths waiting for the decision itself.

The major effect that a cut like this will have on the consumer is in your bond, if you are on a linked rate bond, what you have to pay every month just got less.

Justmoney reckons that you should be able to save money every month by speaking to a home loan specialist who can help you negotiate a better rate.

The other major effect will be on those credit cards that link their interest to the Prime and Repo rates.

Watch this space in the next few days, you might find that what the cheapest credit card in South Africa has changed. However, a small cut doesn't take away the fact that stuff is still expensive, there is a financial crash going on, and a budget can go a long way to helping you through it all.