20 May Big interest Increase on the 19th of May 2022
South Africa, and the world at large, have seen immense spikes in interest rates over the past few months. Civil unrest has begun to run rampant while all-out war ensues within Eastern Europe. Needless to say, things aren’t looking too promising. As mentioned, South Africa is too bearing the brunt of all these issues, with the added drawback of its crippling economy.
On the 19th of May 2022, the benchmark interest rate was raised by South Africa’s central bank. This increase was by the greatest margin seen in nearly six years. These raises have alluded to a future riddled with higher borrowing costs, which has been a direct response to capital outflows and global inflation. Despite the government’s best efforts to battle ever-increasing inflation and a brief period where the rand was in good stead, rates are rising at an alarming rate.
The interest rate was raised by 50-basis points. This means, in short, that inflation will have increased by half a per cent. Repo rates are now sitting at 4.75 per cent while prime interest sits at a whopping 8.25 per cent. This will result in noticeably more expensive home loan financing. While these rates may be incredibly high for South Africans, they are still far below the rates imposed during the prime of the Covid-19 pandemic.
Unfortunately, things don’t end there. The SARB predicts at least another percentage increase (100bps) throughout this year. Not only will interest rates be a point of concern, but the consumer price index (CPI) can affect the livelihood of many South African consumers. Although the CPI is not currently rising, it still resides within the upper target range while the rand gradually weakens. The food and fuel hikes, electricity crisis (load shedding) and the ongoing war put a major strain on the country’s GDP.
Homeowners and property buyers will need to embrace higher home loan payments. This can affect many new-home owners that are currently in a vulnerable financial position. The silver lining is that current interest rates are nowhere near as severe as mid-late 2020, however, the cost of living has significantly increased.
Consumers that are currently battling to stay afloat while settling their debt might have a slight disadvantage in these trying times. Keeping up to date with payments, food and fuel prices and an ever depreciating currency makes balancing payments with the cost of living a tricky task. A trusted debt counselling company is always a viable solution to help alleviate the pressure and stress brought upon by debt.
At Debtco Group, we have helped many indebted South African consumers rid themselves of their debt and benefit from the process of debt counselling. Our team of financial experts and debt counsellors can help you set out your budget as well as repayments, allowing you to live comfortably while still managing to pay off your debt.
If you are currently struggling with ever-growing interest rates, food prices and fuel price hikes, feel free to contact us today.