The Bank of Namibia yesterday cut the rate at which it lends to commercial banks from 10,75 to 9,75 per cent, following a one per cent cut in the South African Reserve Bank's repo rate.

Namibia's four commercial banks had not changed their rates at the time of going to press.

But the move could see the Namibian prime lending rate fall from 15,5 to 14,5 per cent, and the basic home loan rate drop from 15 to 14 per cent.

"It is envisaged that the cut in the Bank rate will lead to a reduction in the cost of borrowing from commercial banks, which will inevitably further boost business confidence and enhance growth in the domestic economy," Bank of Namibia Governor Tom Alweendo said in a press statement.

According to sources, it could see a home buyer with a N$100 000 house being paid over 30 years save about N$80, and one with a N$200 000 house save about N$160.

The decision to cut rates was because of the need to align domestic rates with those in the Common Monetary Area, Alweendo said.

Commentators in the business world welcomed the news.

Chairperson of the economics standing committee of the Namibia Chamber of Commerce and Industry (NCCI), Rainer Ritter, said the announcement was "positive".

Although markets expected rates to be cut again this year, few had expected them to fall so suddenly, Ritter said.

"It shows the SA government wants to stimulate the economy, and it should also filter through to our economy if local banks also cut their rates," he said.

"All economic indicators were in place for such a cut," said Johannes !Gawaxab, Chief Executive of Old Mutual Namibia.

He added that the cut meant "cash in the bank" was no longer such a good investment for savers.

They should, he said, now consider equities in order to get good returns.

EXPECTATIONS

A senior researcher at the Namibian Economic Policy Research Unit (Nepru), Tekaligne Godana, said he expected further rate cuts before the end of the year.

"We are probably looking at another two per cent reduction if nothing radical happens, such as the rand weakening seriously," he said.

He added, however, that currency markets had expected rate cuts, and it was unlikely the decision would cause the Namibia dollar to weaken much against the US dollar.

Ritter said the SA Reserve Bank was likely to adopt a "wait and see" attitude and not cut rates before December, so they could judge the effects of the three rate cuts so far this year on inflation and the exchange rate.

The Namibian and South African central banks raised interest rates four times last year in an attempt to slow down spiralling price hikes throughout the region, which were caused by the rand falling to record lows against the US dollar in late 2001.

Local News Headlines Of The Last 48 Hours

•  Delays in tourist murder case test court's patience
•  Fire Minister: RDP youth
•  Cool, rainy weather in South
•  Community farm 'commandeered', residents face a barbed future
•  Court administration takes fast lane at Swakopmund
•  Devastating fire in Okahandja area
•  Huge donation for hospital
•  Veterans Board announced
•  Roessing man accused of assaulting child
•  Region's dream to come true
•  Merlus gets double certification
•  Train wheels grind to a halt as railway strike takes effect
•  Three go free in gang-rape trial
•  AirNam wraps up probe
•  Minister gags cell firms Mobile price wars 'embarrassing' Govt