{"id":3534,"date":"2020-07-27T08:00:33","date_gmt":"2020-07-27T06:00:33","guid":{"rendered":"http:\/\/contattoblogs.timslatter.co.za\/?p=3534"},"modified":"2020-07-27T08:00:33","modified_gmt":"2020-07-27T06:00:33","slug":"what-the-low-interest-rate-means-for-you","status":"publish","type":"post","link":"https:\/\/contattolive.co.za\/north\/what-the-low-interest-rate-means-for-you\/","title":{"rendered":"What the low interest rate means for you"},"content":{"rendered":"<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">In light of the difficult times recently, Southern Africa has been awash in low interest rates. When South <\/span><span style=\"font-weight: 400;\">Africa significantly cut its base interest rate from an already-low 6.25% down to 4.25%, it officially became the lowest interest rate the country has ever had. In late 2019, the Bank of Namibia&#8217;s Monetary Policy Committee reduced the rate to 6.5% from 6.75%, then lending rates at Bank Windhoek were slashed further come 2020.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Interest rates, particularly interest rate cuts, typically<\/span><span style=\"font-weight: 400;\"> have complex and far-reaching effects on the market, but what does it mean for you?<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">From you as a consumer to you as an investor, we\u2019ve rounded up the most significant ways the low interest rate affects you \u2013 and how to best capitalise on it.<\/span><\/p>\n<p style=\"text-align: justify;\"><b>Cash is not king (when investing\u2026)<\/b><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">In the wake of the devastation of the markets, economy and the enormous volatility in recent history, the interest rate cuts came as a boon to consumers to keep their heads above water. But what is a help to the consumer is a hindrance to the investor. Yes, money not appreciating in value means that goods and services won\u2019t cost more and a household\u2019s day-to-day dollars will stretch further, but any money set away in savings won\u2019t appreciate in value.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Now is not the time to be overweight in cash investments. \u201cIf you\u2019ve got money in a bank deposit account, money market account or other \u201ccash-type\u201d vehicle, your interest rate earned will fall by a full 2%,\u201d said<\/span><a href=\"https:\/\/prudential.co.za\/insights\/articlesreleases\/4-ways-sa-s-interest-rate-cuts-impact-you-as-an-investor\/\"> <span style=\"font-weight: 400;\">Prudential<\/span><\/a><span style=\"font-weight: 400;\"> earlier this year. \u201cAccording to Prudential\u2019s calculations, cash-related investments are now only likely to return around 0.2% p.a. more than inflation over the next three to five years. With its potential returns so much lower, the cash holdings in your portfolio could now be too high if you have a medium- to longer-term investment timeframe, acting as a drag on future returns.\u201d<\/span><\/p>\n<p style=\"text-align: justify;\"><b>Risky business<\/b><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Fortune favours the bold, especially in this kind of market. As we have mentioned above, simply leaving your cash to sit in an account as a means of saving will not get you any richer (in fact, it\u2019s now worth 2% less!) and so higher risk, with higher yield, options need to be considered. For example, things like equities, investing offshore and gold have all found favour recently.\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><b>A debt to pay<\/b><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">A recent communication from insurer Liberty outlined another useful aspect of the low interest rate. \u201cThis is the lowest interest rate cycle we\u2019ve seen in a long time \u2013 cut off your debt and do not get into new commitments right now,\u201d said Liberty economist Tendani Mantshimuli.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">In addition to this, your home loan costs are lower, because the value amount in your bond is worth less than it used to be when interest rates were higher. It\u2019s a great time to repay your debts faster, but try not to extend debt as it will be more affordable now, but will become expensive when the interest rate increases again and markets strengthen.<\/span><\/p>\n<p style=\"text-align: justify;\"><b>Now is the time to save<\/b><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Compound interest is one of the most wonderful roads to wealth creation \u2013 it\u2019s why financial advisers urge people to start saving younger. Unfortunately, it is hamstrung by low interest rates. In our current environment, any savings will take longer than it would have in the past to be worth as much and then to appreciate as much as when rates were higher.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">For that reason, it\u2019s even more important than ever to set aside as much for savings as you can, as early as you can, because more than ever you can\u2019t afford to lose out on valuable time that will make you compound interest later.\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Ultimately, like every move of the market, low interest rates have their good sides and bad, opportunities and dangers. That\u2019s why it always helps to stay in touch with your financial adviser who can help you make the most of exactly where you are.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In light of the difficult times recently, Southern Africa has been awash in low interest rates. When South Africa significantly cut its base interest rate from an already-low 6.25% down to 4.25%, it officially became the lowest interest rate the country has ever had. In late 2019, the Bank of Namibia&#8217;s Monetary Policy Committee reduced the rate to 6.5% from 6.75%, then lending rates at Bank Windhoek were slashed further come 2020. Interest rates, particularly interest [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":3535,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12,27],"tags":[],"class_list":["post-3534","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","category-market"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>What the low interest rate means for you - Contatto North<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/contattolive.co.za\/north\/what-the-low-interest-rate-means-for-you\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What the low interest rate means for you - Contatto North\" \/>\n<meta property=\"og:description\" content=\"In light of the difficult times recently, Southern Africa has been awash in low interest rates. When South Africa significantly cut its base interest rate from an already-low 6.25% down to 4.25%, it officially became the lowest interest rate the country has ever had. In late 2019, the Bank of Namibia&#8217;s Monetary Policy Committee reduced the rate to 6.5% from 6.75%, then lending rates at Bank Windhoek were slashed further come 2020. 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