Nobody is talking about this new interest rate cut. The usual suspects – financial advisors and social media trolls – don’t seem to be commenting. Do they know something none of us know? Well, it might seem like a small percentage, but the interest rate decline is worrying.
There are going to be losers in this interest rate–cutting madness. And winners. The winners are easy to spot — ordinary home loan and credit owners are smiling. Estate agents are rubbing their grubby little paws telling customers to buy now, which is their usual mantra.
As of mid-2025, a typical money market fund would be yielding in the 7% to 8% range.
I’m not a financial advisor. All I want to do is look at the interest rate landscape and see some of the consequences of this desperate cutting of the repo rate by the Reserve Bank.
Why Savers Are Penalised
• Lower returns on savings: With the repo rate at 7% (July 2025) and the prime lending rate at 10.5%, banks have slashed interest rates on savings accounts and fixed deposits. Retirees and those relying on interest income are hit hardest.
• Inflation quietly erodes gains: If you earn 7% and inflation is 5%, your real return is just 2%. If inflation rises to 6%, your real return slips to 1%. For many savings accounts paying 4–6%, the real return is near zero — or negative.
• Encouragement to spend, not save: The SARB is prioritising economic stimulus over savers’ interests. That’s the trade-off: cheaper loans for borrowers, lower income for savers.
The Other Side of the Coin
Borrowers are laughing. Lower rates mean smaller bond repayments, more affordable debt servicing, and bigger spending power. Banks love the activity. Estate agents preach urgency. Politicians praise economic growth.
And Yet…
For savers, the maths is simple: you’re now running harder just to stand still. The interest you earn barely beats inflation — and in some cases, it doesn’t. Your money is quietly losing value in real terms.
The Sting in the Tail
We’ve been here before. Rate cuts make the economy look busier for a while, but they punish the cautious and reward the indebted. The silence from financial commentators is deafening — maybe because they’d rather not admit that if you’re a saver in 2025, you’re the one funding everyone else’s party.
