OWN CORRESPONDENT, Johannesburg | Friday 12.15pm
THE four major commercial banks announced they are cutting their prime and home loan rates from 17,5% to 16,5% on Friday.
Standard Bank, Absa, Nedcor and First National Bank announced a cut in their rates by one percentage point following a steady decline in the repo rate. The decrease comes into effect at all banks on August 2 but FNB will only lower its home loan rate to existing customers on August 16.
The cuts mean interest rates have now fallen seven times this year, by a total of 6,5 percentage points, bringing borrowing costs down to their lowest level since September 1994.
The central bank opened the way for the latest cuts after its repo rate, the rate it charges commercial banks as lender of last resort, fell to 13,75% on Thursday, about 80 points down from when the banks last cut rates on July 7. Economists hope the latest round of rates will breathe life into the moribund economy, which briefly slipped into recession last year and managed just 0,4% growth in the first quarter of this year.
Equities are expected to stay at lofty levels on Friday after the rate cut. Dealers said the market is unlikely to stage a solid run as the rate cut at a time when concerns about weakness on global bourses is weighing on sentiment.
”The market will be pleased with the one percentage point cut as people were expecting only half a percentage point,” said Greenwich Equities’ Lindsay Williams.
”But it’s not going to have as much of an impact as it would have had if the timing been different. People are concerned about what’s happening offshore,” he said. — Reuters