Thursday's rate cut will make little difference to most over-indebted South Africans, the country's largest debt counsellor DebtBusters said.

"The interest rate cut is a movement in the right direction, but at least 80 percent of our clients will not see any tangible impact from this.

"They would still be over-indebted if interest rates halved from their current levels" said DebtBusters' MD Luke Hirst.

Earlier, SA Reserve Bank Governor Tito Mboweni said the Monetary Policy Committee had decided to cut the repo rate by 100 basis points with effect from 4 May.

Hirst said in many cases, clients approached DebtBusters too late and not even new government legislation was enough to get them out of their debt problems.

"South Africans spend up to 75 percent of the monthly income servicing their debt, whether it be short or long term, so an interest rate cut of one percent is doing very little to help the seriously indebted."

Hirst added that while the National Credit Act had done "a very good job" of restricting the flow of credit and preventing reckless lending, many clients had still received credit since June 2007.

This was due to "exaggerations" on their credit applications, the credit bureau information not being up to date or due to the lender's affordability check not being effective.

"We are seeing a more positive attitude from many of the credit providers, as they have realised that the last resort is to auction the client's vehicles and properties.

"If they can restructure the client's repayments effectively under debt review or through debt management then they will certainly go via this route," Hirst said.

Sapa