Increase in interest rate to hit consumers

2014-07-18 00:00

THE Reserve Bank’s one-quarter basis point increase in the prime interest rate will put more pressure on cash strapped consumers.

Reserve Bank governor Gill Marcus yesterday announced the repo rate would be raised by 25 basis points to 5,75%, in response to inflation breaking through the three to six percent barrier.

“Consumers struggling with debt need to prepare for greater challenges as the interest rate hike will have a severe impact on their financial situation,” said Ian Wason, chief executive officer of DebtBusters.

“Although not unexpected, the increase … is unfortunate news for homeowners, as well as the growing number of first-time buyers,” said Andrew Golding, chief executive of Pam Golding Property.

For many consumers, the bond repayment is their biggest monthly expense. A home owner with a bond of R890 000 over a 20-year repayment period would have had to pay R284 more per month after the January interest rate hike. The latest increase means they now need to find an additional R177 per month.

“Ultimately, the increase will most be felt by those who are feeling the pressure of rising utilities costs and erosion in disposable income,” said Golding.

“Considering that the housing market is finally on the mend, this is just too soon and will do little to instil investor confidence or encourage economic growth,” said Seeff Properties chairperson Samuel Seeff.

As an indication of the trouble that South Africa’s massive army of debt-laden consumers are in, the country’s biggest debt counselling firm said its clients required 102% of net income to service their debt obligations in the first quarter.

“The 0,5% repo rate increase in January will be starting to effect home loan defaults,” said Wason.

Golding said he hoped the interest rate would remain stable in the months ahead, as the economy ­required growth stimulus.

The interest rate increase will also hurt car sales and the auto industry.

Join the conversation! encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions. publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Inside News24

Traffic Alerts
There are new stories on the homepage. Click here to see them.


Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.

Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire network.


Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.

Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.