Reserve Bank moves to change the way it lends money to banks, which are short of funds, may change the way you borrow money from your bank and it could mean more competition among banks for your business and new ways to structure your finances.
This is the personal view of John Lloyd, director of the treasury department at Standard Bank.
Lloyd says the announcement by the Reserve Bank this week that it is to change the way it will lend money to other banks and fix interest rates means some changes for you.
At the moment the Reserve Bank, virtually by dictate, sets what is called the bank discount rate. This is the rate at which the Reserve Bank lends money to the commercial banks. This in turn establishes a platform for the interest rates banks charge when you borrow money or pay when you save money.
Lloyd says under the system that is proposed by the Reserve Bank known as the "repurchase transactions" the Reserve Bank will virtually auction money.
When there is a shortage in the money markets and the banks need more cash they will tender for money made available by the Reserve Bank. In theory if there is a shortage of money rates will be higher and lower if there is an abundance.
However, Lloyd says that this does not mean market forces have free rein. The Reserve Bank will still be able to affect rates by altering periods of lending either shortening or lengthening the period for which it is prepared to lend, or by deciding how much money it will make available to the commercial banks.
Mark Bertram, head of money markets at FNB, says the main rates likely to be affected are what are called the wholesale rates where institutions and large companies borrow and lend money. Retail rates which affect ordinary individuals are less likely to be affected as often.
Lloyd says the one likely consequence is that interest rates will not move in big one percentage point steps as they have in the past.
He believes that in future interest rate moves will become more frequent and could even be as small as a 0,25 percentage point.
The result for you will be more volatility in the rates you pay but probably more competition from banks which at the moment virtually set rates according to the current bank discount rate.
One of the spin-offs could be the greater use of fixed and capped home loan rates. In Europe, where interest rates follow more or less the system being proposed by the Reserve Bank, fixed and capped mortgage rates are popular because they overcome the problems of volatile interest rates.