Tighten the belt: Repo rate hike shocks homeowners before the festive season
South African consumers are in distress over the announcement by SA Reserve Bank’s (SARB) governor Lesetja Kganyago of the repo rate increase to 6.25 per cent.
![](https://images.caxton.co.za/wp-content/uploads/sites/25/2015/11/repo.jpg)
The monetary policy committee hiked interest rates by 25 basis points and this takes the prime-lending rate to 9.75 per cent.
Wikus Olivier, Debt Management Expert at DebtSafe said although the increase was expected because of the increasing strengthening of the US Dollar in the past few weeks, economists now warn consumers to slow down on their credit facilities.
“The governor said the main reasons for the increase include worsening drought conditions, increase in food prices and adjustments of electricity tariffs,” said Olivier.
“Consumers will have to curb their reliance on credit. Consumers rely too heavily on their credit facilities.
“People are even making use of unsecured payday loans to get through each month, putting them in even more debt every month.
“Although the rate hike was expected, the timing is bad. Retail outlets in the country are dependent on boost in sales over the festive season, and the announcement by the SARB governor might cause sales to decrease in comparison to previous years,” he said.
“The rate hike will impact negatively on the residential housing market though, because with growing financial strain and rising costs of living expenses, a bond repayment will increase substantially (a home loan of R1 million will see a monthly repayment increase of approximately R172). ”
Olivier said consumers must always be careful of price changes and take it into consideration when doing their budgets and projections for the next year.
“Look at your spending habits; especially with the approaching festive season and financial responsibilities in the New Year.”
“Adding to changes in living costs, consumers will have to close their purses tighter and set up a monthly budget.
“Good planning is key, and if you teach yourself and your family to do financial management and update your budget regularly, you will have an amount left over to put into an additional account where you can save your money for times when you need it,” Olivier concluded.