Friday, August 14, 2009

Cut in Repo Rate

Yesterday, 14 August 2009, the South African Reserve Bank made a surprising announcement regarding the repo rate. The repo rate will be cut by 50 basis points bringing it to 7%. Many economists did not see this cut in the rate coming. They had expected the rate to remain unchanged. Economists had expected this cut to have happened back in June.

On a bond of R500,000, this week's rate cut of 0.5% can give the home owner roughly a monthly saving of about R170. This cut in the repo rate doesn't mean that you should now go out and spend this saving on something else.

The repo rate is also known as the repurchase rate. This is the rate at which the Reserve Bank lends money to other banks.

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