The Governor of the South African Reserve Bank, Gill Marcus, cut interest rates by 50 basis points on Thursday, bringing the figure to 5.5%. This was in line with market expectations. FNB, Absa, Standard Bank and Nedbank subsequently announced cuts to their prime lending rates from 9,5% to 9%.

The monetary policy committee (MPC) has cut rates by 6 percentage points since December 2008 to help the economy recover from recession. The latest cut brings the mortgage rate to its lowest level since mid-1974. Mortgage repayments will now be approximately 33.5% lower than in late 2008 when the mortgage rate stood at 15.5%.

Although consumer inflation is at a five-year low at 3.2% and there has been a recovery in consumer spending, the rate cut indicates the MPC’s concern for SA’s sluggish recovery. Of course, this is on the back of the recent increase in domestic consumer spending in September.

What are your thoughts? Will this rate cut encourage you to spend more money or will you be repaying debt?