Make the most of the opportunity to lock in your savings at current interest rates before the interest rates are lowered.
Home loan and prime lending rates at all the major banks have dropped by a percentage point following the announcement by Reserve Bank governor Chris Stals at the weekend that the bank rate would decrease by one percent to 16 percent.
The bank rate is the rate at which the Reserve Bank lends money to commercial banks.
Already fixed deposit rates have shown signs of dropping. So far Investec Bank, Marriott Merchant Bank and the New Republic Bank have adjusted their fixed deposit interest rates downwards.
By next week, you can expect to see a flurry of downward adjustments in investment and saving products as banks even out their margins.
In other words, if banks are now charging you less for borrowing money, you can expect to receive less from them when you invest.
If you are in the market for a voluntary retirement annuity, you should consider buying one immediately before the interest rates drop.
On the flip side, for home owners the decrease in the base home loan rate from 20 percent to 19 percent is good news. It translates into a saving of R78 a month on a mortgage loan of R100 000 over 20 years.
"Although the reduction is modest in terms of the impact on the pocket of the consumer and translates into a small benefit to take home pay, we are encouraged by what signifies a positive trend and we look forward to further reductions in the medium term," says Trevor Olivier, general manager NBS Mortgage Lending.
The prime lending rate has also been cut by one percentage point to 19,25 percent.
First National Bank was first to announce a one percent drop in its home loan and prime lending rates at the weekend. ABSA, Nedcor, Saambou, NBS and Standard Bank have followed suit.
Standard Bank will only apply the new rates from November 1. At all the other banks, these new rates are effective immediately, although existing home loans will only be affected from November 1.