Banks have cut lending rates by one percentage point to 16,5 percent, bringing a smile to the faces of borrowers who have not seen rates at these levels since 1995.
Yesterday's cut is the third decrease in a month and home loan rates are now 1,5 percentage points lower than a month ago.
The cuts have been prompted by an easing of the Reserve Bank's monetary policy which has allowed the repo rate (the rate at which the central bank lends to the banking system) to fall.
If you have a R300 000 loan at the new rate of 16,5 percent over 20 years, you will have about R340 more in your pocket every month than a month ago.
On a R150 000 loan at the same interest rate over 20 years, you will have just over R170 a month to spare.
Compared to September last year when rates were at their peak of 24 percent, you are now paying about R1 770 a month less on a R300 000 loan and R880 less a month on a R150 000 loan taken over 20 years.
More good news is that further cuts are probably on the way.
John Maxwell, managing director of NBS says all the signs point to lower interest rates.
RMB economist Etienne le Roux says the health of the balance of payments (South Africa's accounts with the rest of the world) is the most encouraging sign.
"As long as the rand remains stable, and there are no external shocks, we think interest rates could decline further, though the decline is likely to slow.
"By year-end we predict prime and home loan rates will be at 15,5 percent, with a further cut to 14,5 percent in the first months of next year, at which point rates will probably be close to the bottom."
Absa's Fanie Leach says: "I certainly don't think we've reached the bottom of the interest rate cycle yet."
He says factors which suggest further cuts include:
* Economic growth is still slow and could benefit from the stimulus of an interest rate reduction;
* Money supply growth is within target levels (which could encourage the Reserve Bank to ease monetary policy further);
* Core inflation (not counting the latest uptick because of higher petrol prices) is on a downward trend;
* Foreign exchange reserves are higher; and
* The rand is stable P "probably more stable than we expected".
"I think we may see an interest rate consolidation at this level for a while ... I don't see another cut in August.
"But by year-end I think another percentage point cut is likely. And rates could go to 14 percent in the year 2000 barring any emerging market crises," Leach says.
But it would be a mistake to view the latest interest rate drop as a signal to spend.
Remember that if you maintain your monthly bond repayments at today's level when your new rate kicks in, you can save plenty of money over the life of your bond.
For instance, on a R300 000 loan over 20 years, if instead of dropping your monthly repayment to about R4 290, you maintain it at about R4 510, you will save yourself a whopping R219 000 over the life of your bond.
On a R150 000 loan over 20 years, you will save about R110 000 just by maintaining your monthly instalment at about R2 260 instead of dropping it.
In both cases, you will reduce the term of your bond by five years to 15 years.
Remember that if you pay your home loan through a debit order, the bank will automatically reduce your payments. If you want to keep your payments at today's level, it is up to you to notify your bank.
At Absa, Standard Bank and Nedcor (Nedbank, Permanent Bank and People's Bank) the new rate for existing home loans comes into effect on August 2, while at First National Bank and NBS the new rate for existing borrowers kicks in two weeks later on August 16.
If you are taking out a new loan you qualify for the new rate right away.