A country’s central bank sets interest rates. In South Africa (SA), Interest rates are determined by the South African Reserve Bank (SARB). Although the decision to raise interest rates isn’t the Reserve Bank governor’s alone.
Interest rates drive economic growth as a country’s current interest rate is that guiding rate. Whether for jobs or what banks charge, for loans being more expensive to how people save, invest or spend, purchase property to even how they run their businesses.
Currently, in SA the interest rate has been cut by SARB, which held its benchmark repo rate at 6.5 percent on September 20th, 2018.
While the Bank Lending Rate (prime lending rate) in SA remained unchanged at 10 percent in September of 2018. It has also been stated that it’s unlikely that the interest rate would change and will remain unchanged into late 2019.
The cut in rates provided a relief to under pressure consumers facing a first Value-Added Tax hike, a hike in the petrol price and the introduction of the sugar tax. It’s also meant that savings rates fall.
And savers find they get less interest on their deposits as savers will continue to earn the same amount of interests on their savings. The debt will also continue to be paid back with the same level of interest.
While for property a cut in interest rates means low mortgage rates have the same effect as lower housing prices, stimulating demand for real estate. This means it’s a good time to buy property and a bad time to sell it.