Banks would do well to remember that marginal adjustments of interest rates have non-negligible effects when leverage is high. A prolonged period of low interest rates also has important implications for insurance companies and pension funds with their longer-term guaranteed returns or benefits.
The present unsatisfactory situation emphasises the long identified need for South Africans to save a greater percentage of our income or, to put it in more sensible economic language, to consume less. We must remember that, in terms of the macro-economy, consumption financed with borrowed funds counts as negative saving.