Another Repo Rate Increase Hits Already Stressed Consumers
Repo Rate News
As anticipated, the SA Reserve Bank Monetary Policy Committee has decided to increase the Repo Rate.
While this is aimed at driving down inflation it will hurt millions of consumers who make use of credit. A higher repo rate and bank rates traditionally helps keep inflation in check.
The recent “scandal” regarding the Lady R (Russian ship) offloading and onloading in Simon’s Town hit the Rand sending it to all time lows, combined with the ongoing loadshedding are negative factors which were also taken into account by the SARB’s MPC in making the decision to hike the rate.
The Repo Rate has been 7.75% and has now been increased by 50 Basis points.
This means the new rate is 8.25%.
Yet Another Hike
Since the historic lows of the early pandemic, the Repo Rate has slowly been pushed higher and higher.
As the rate climbs, the banks (and other credit providers who offer credit) have been increasing the rate they charge consumers on loans, credit cards, bonds, car finance and overdrafts (note: what they are allowed to charge is linked to the repo rate by law).
Prime Rate now at 11.80%
Read More: What is the Repo Rate?
This means the latest rate hike is going to increase the monthly repayment amounts on all credit accounts*.
For many consumers who have been struggling to cope with the high cost of living and also paying off the debts they already have taken on this is bad news.
As debt repayments go up less and less money becomes available for anything else. Some consumers are thus stick in a loop of using their credit to pay for the essentials each month (like food, data, transport and accommodation).
Time To Update Your Family Budget
When the interest rate changes it is good to review your monthly spending and your debt commitments so that the whole family is all on the same page.
While you might not be in the habit of doing this, you will find that hiding debt or expenses from others in your household can cause stress, a breakdown in trust. It can also leave partners pulling in different directions financially since they are not fully informed about what they can and cannot realistically afford to spend on things.
If you find you cannot cut back any further on your expenses than you already have then you should feel free to go speak to a Debt Counsellor about what your options are.
‘speak to a Debt Counsellor about what your options are’
You might find they have insights and are aware of options that you don’t know about. A fresh set of eyes is often helpful and they can advise you while keeping things confidential.
*it is possible to get fixed interest rates with some credit providers but this has to be arranged at the time of taking out the credit and is usually higher than what everyone else is paying at the time. It’s a bit of a gamble but can give peace of mind in ensuring your repayments never change.