19 Jun South Africa’s Middle Class is Suffering
Middle-class South Africans may have lived a comfortable existence before, but are now financially threatened by continuous interest rate increases and high inflation. With every price hike and repo rate surge, the spending power of middle-class households and individuals is reduced further. There is no way for salary increases to compete with the rising costs of living, which is resulting in defaulting payments on home loans and car loans, and more credit card debt.
It is a dire reality to face, where most South Africans are feeling the strain of too many financial obligations, and the unmanageable costs of living. Studies completed recently show that the demand by consumers for Debt Review has increased significantly, as a result of credit reliance. While we strive to offer a Debt Review service to all who need it, our Debtco Group team encourages South Africans not to count on credit when times are tough, and to instead readjust their lifestyles to afford the necessary expenses they need to maintain. It is much simpler to curb spending now than face over-indebtedness in the near future.
According to data from Eighty20’s Credit Stress Report for Q4 2022, more than 800,000 consumers entered the credit market during the last 4 months of the year. This data also shows that a trend for middle-class workers seems to be relying on credit cards to help them afford their lifestyles. The reason this is concerning is that this same segment of individuals is also starting to show difficulties in managing their home loan repayments and vehicle financing agreements. These are larger loans with higher interest rates, where the repo rate increases leave much more of an impact.
Middle-class consumers should be avoiding unnecessary credit, while prioritizing paying off their biggest expenses linked to interest rates, such as home loans. The financial challenges facing middle-class consumers who earn about R15,000 are real, with many families affording their groceries and essentials by spending on credit or store cards. Unfortunately, this is a very temporary solution with long-term effects. As consumers get into more debt, they face higher monthly instalments because of interest rate fluctuations. It is important to cut back on luxuries to accommodate necessities.
If you are spending more than half of your salary paying off debt, this may be an indicator that you’re living beyond your means. Our Debtco Group team provides a personalized Debt Review service to those who are over-indebted, and we can help you get your finances and life back on track. Get in touch with us today.