Most consumers agree to pay the banks interest on money they loan or credit they use that is ‘linked’ to the prime rate. This means that a change in the repo rate, affects the prime rate, and thus affects how much consumers have to pay each month.
A small change of even…a quarter of a percent can have big impacts on bigger loans or credit facilities. The impact is more noticeable.
This is especially true if the loan or credit is used over a long time period. The bigger the increase the more the impact will be.
‘The bigger the increase the more the impact will be’
Conversely, when the repo rate is lowered (it does happen), then the banks will lower their rates to consumers.
This means consumers will not be asked to pay as much towards their debts each month.
The repo rate impacts on all those who make use of credit. It also indirectly impacts on what they need to live or run their business. This means that they might adjust their prices to their clients. So, in many ways, the Repo Rate effects everyone.
