The petrol price may have come down recently, but inflation is still beyond the South African Reserve Bank’s ( The SARB) target of 3-6%. At the time of writing this article, inflation stands at 7.4%. This is according to Chief Economist at Nedbank, Nicky Weimar. Weimar also believes that South Africans can expect to see at least two more interest rate increases of 25 basis points for the first half of the year.
The first meeting of The SARB’s Monetary Policy Committee for the year will take place on 26 January 2023.
If Weimar’s predictions are correct, the repo rate will be at 7.5% and the prime lending rate at 11%.
How will this affect you?
Because of the increase of the prime lending rate, your payments on your bond and car loan will increase too.
A closer look at inflation and rising food costs
Inflation refers to the increase of the cost of goods and services in an economy. As inflation increases, your purchasing power decreases.
Increasing food prices were trending on Twitter after South African actor, Nico Panagio, tweeted that he would no longer be shopping at Woolworths as frequently because of their continuous hikes in food prices.
In response, several South Africans agreed, voicing their frustration while also highlighting the increase of prices at other supermarkets.
A recap of the continuous interest rate hikes in 2022
At the beginning of 2022, the repo rate was at 3.75%. For the entire duration of the year, the repo rate was increased by a total of 325 basis points, with the final increase in November taking the repo rate to 7%.
At the same time, the prime lending rate which is directly impacted by the repo rate went from 7.25% - 10.5%. It’s no wonder then that South Africans have increasingly been feeling the pressure since 2022.
The current state of the impact of interest rate hikes
According to an article published by Moneyweb, if you have a bond valued at R800 000 taken over 20 years at the prime lending rate, at the beginning of 2022, your monthly installment would have been R6323. By the end of 2022, and currently (January 2023), your monthly installment is R7987. That’s an increase of R1664.
The increase of a bond of R1 250 000 at prime over 20 years is R2600.
This is problematic, especially for many South Africans who budget to the last cent. In an interview with Carte Blanche, Founder & CEO of Meerkat, David O’Brien had this to say:
“If you are already living very close to the line, and your bond and car repayment both go up with the increase of interest rates, it’s no surprise that this can push you over the edge.”
14 questions to ask yourself that may indicate you are over-indebted
- Are you lying asleep at night worrying about money?
- Is debt interfering with your home and or work life?
- Do you need to use your credit card to pay for essential items like food, telephone, electricity etc?
- Are you in arrears on payments?
- Have you received a Section 129 notice?
- Do you use more than one credit card?
- Are you using one card to pay off the other?
- Do you only pay the minimum balance each month?
- Do you borrow to pay your bills?
- Do you skip paying bills some months?
- Are debt collectors calling you?
- Next month’s bills arrive before you have paid this month?
- You often pay bills late, if at all?
- More than 50% of your salary is going to paying off debt.
If you answered yes to five or more of these questions, there’s a good chance you are over-indebted.
For peace of mind, and a real chance to sleep at night, you should consider debt counselling at Meerkat.
Did you know: over 8 million South Africans are in a similar position?
What is debt counselling and how does it work?
Debt counselling, also known as debt review, is a debt relief measure that was introduced by the National Credit Act (NCA) to help over-indebted consumers.
After filling in an application form, one of our friendly Debt Counsellors will contact you and determine whether or not you are over-indebted.
If you are over-indebted, we can then begin the process of putting together an affordable repayment plan to assist you with paying off your debt.
By signing up for debt review at Meerkat you can:
- Get immediate debt relief.
- Reduce your monthly debt payment by up to 50%.
- Pay one monthly installment for all your debts.
- Reduce your interest rates from 20% to 4%-5%.
- Protect your assets (home and car) from being repossessed.
You deserve a good night’s rest and a chance to pick up your phone without worrying that it’s another creditor harassing you for payment.
Immediate debt relief could be yours. Fill in the contact form today.