Rising interest rates will further increase the heavy burden…

This year’s second quarter TransUnion Consumer Pulse study showed that 56% of consumers said they were likely to default on at least one of their bills and loans in the next three months.

More than half of households surveyed (52%) said they would have to cut back on discretionary spending due to continued inflationary pressure.

Lee Naik, managing director of TransUnion South Africa, said ongoing rate hikes meant higher monthly debt repayments on top of soaring food and fuel prices, which combined to paint a picture. worrying about credit:

Although most consumers (93%) surveyed felt that access to credit and loan products was important to achieving their financial goals, less than half (42%) said they had sufficient access to credit.

More than half (51%) said they had considered applying for a loan or refinancing an existing loan, but decided against it.

Most consumers (89%) said credit monitoring was at least moderately important, with 62% saying they monitor their credit at least once a month.

Although the decision to increase the repo rate by 75 basis points seems to have been a bit of a market shock, a more pronounced increase was expected by the real estate market.

Samuel Seeff, chairman of the Seeff Property Group, said while the increase would affect the cost of mortgages and debt, it was unlikely to affect underlying market demand.

“The reality is that the weaker rand and inflation spike at 7.4% has accelerated rate increases. We are likely to see more aggressive hikes in September and November with the prime rate back to pre-pandemic levels of 10% by January 2023, if not sooner,” Seeff said.

A calculation by the FNB shows that if you had a mortgage of R1 million at prime plus 2%, your monthly repayment of R9,885.43 will now increase to R10,390.88.

Similarly, WesBank has calculated that a consumer with a five-year car loan of R350,000 at the prime rate will see their monthly payment drop from R8,214.19 to R8,343.97 due to rising interest rates. ‘interest. (WesBank’s calculation includes monthly administration and initiation fees, but does not reflect a lump sum deposit or payment.)

Ayanda Ndimande, Sanlam’s business development manager for retail credit, said rising interest rates will put even more pressure on consumers as credit becomes more expensive.

“The cost of goods and services, which are already high, will increase further while consumer income does not increase, which means that the basic income is decreased,” she said. “What consumers can do is reduce their spending on luxuries and consider lifestyle changes such as downsizing to a smaller car and/or home.”

Ndimande advised consumers to negotiate interest rates on any new credit agreement so they are better able to manage repayments. DM168

This story first appeared in our weekly newspaper Daily Maverick 168, which is available nationwide for R25.

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