Cape Town - Deeply indebted consumers can count themselves lucky that the Monetary Policy Committee (MPC) of the SA Reserve Bank (Sarb) decided to keep the interest rate stable at 5.75%, according to Neil Roets, CEO of Debt Rescue.
"Any increase in the repo rate, coming on top of the Eskom rate increase and an expected rise in the fuel price at the end of the month, would have been 'problematic'. Deeply indebted consumers are incredibly vulnerable to any price increases and an escalation in the cost of borrowed money would have hit them hard," said Roets.
"An increase later this year can, however, not be ruled out. We know that two of the six members of the MPC voted in favour of a 25 basis point increase, which shows that it is only a matter of time."
Rate reductions needed
Kelli Knutsen of DebtBusters said interest rate reductions are needed to reduce consumer debt levels to more manageable amounts.
She said the decision to keep the prime lending rate at 9.25% provides no relief for over-indebted consumers.
“Recent client statistics released by DebtBusters have indicated that consumers entering into the debt counselling process and earning less than R5 000 per month are already financially crippled, as the average interest rate for unsecured credit agreements is 24%, the highest amount recorded in six years," said Knutsen.
"The unchanged rate will give South African consumers with large amounts of debt a second chance to resolve their finances while they still can, but will also provide no short-term relief, as the interest on these debts will stay the same.”
Knutsen said this same income group now needs over 160% of their net monthly income to service their debt.
READ: No change in interest rates
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