The rise in the Repo Rate impacts all South Africans, but those with high levels of debt will feel it most as the prime lending rate (rate at which commercial banks lend money to consumers) goes up.
22 September 2016
Reserve Bank Governor Lesetja Kganyago, today announced that the repo rate will remain at 7%, which comes as no surprise to most of the nation especially with the South African Rand (ZAR) strengthening against all currencies. 2016 has been a year full of surprises, from the President paying back the money to the Finance Minister being investigated by the Hawks.
The political and economic landscape in the country has not been stable, due to infighting within the ruling party and the external pressures from the major opposition parties. This has resulted in uncertainty, reducing the value of the Rand, which gives rise to basic living costs increasing. This has left most South Africans with not much of an option but to turn to borrowing to make ends meet. Ian Wason the Chief Executive Officer of DebtBusters, South Africa’s largest debt counsellor, says “this has fuelled the increase in numbers of over-indebted consumers in the country. What is most concerning for the large banks, is that the increase of enquiries from consumers with vehicle finance or homeloans has been over 35% year on year. “
South Africans still remain under financial pressure despite the repo rate not changing due to the current political turmoil which is not expected to change in the interim. The National Credit Regulator crackdown on reckless lenders, new amendments to the NCA and the decrease in the cap of unsecured interest rates has credit providers reducing the amount of credit being lent, which has left consumers with very few options. Many continue to borrow and take out debt from expensive, unscrupulous lenders in the marketplace. This leaves them in a more vulnerable position and forces them to seek the help of debt management experts, who can offer them the relief they require. Wason goes on to say “Financial education is key for most consumers to reduce the levels of over-indebtedness in the country. “
Debt management solutions such as debt counselling were introduced by the National Credit Regulator to offer over-indebted consumers the opportunity to take control of their debts and set up an affordable payment plan with a debt counsellor in order to eventually become debt free.