There is no relief on the horizon for consumers who battle to pay off their debt as economists expect no repo rate cut this week.
Consumers are now probably paying almost 40% more on their loans than they did in 2020, which makes a major difference to consumers whose income did not keep pace with inflation and interest rates.
“Debt on variable interest does not have a fixed interest rate. Premiums change according to the repo rate, the rate that the South African Reserve Bank charges commercial banks. Based on this, banks then charge a prime rate to their clients. If banks pay more, their clients pay a higher prime rate too.”
Ndimande urges South Africans to do a budgeting exercise before applying for credit to understand the opportunity cost that comes with it. “With South African monetary policy still deemed restrictive, authorities are mindful of the increasing economic hardship consumers face but also alive to the heightened risk of capital outflows”.
In addition, they say, while the upside risks to the inflation outlook are a concern, they have eased moderately since the last policy meeting and remain driven by exogenous and supply-side pressures while demand-side risks continue to subside.
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