Interest Rate Hike

Reserve Bank Push Up Repo Rate

The SARB Monetary Policy Committee announced this week that the Repo Rate was going up by 50 Base Points.

There had been an expectation of a rate hike but the debate had been in regard to whether SA consumers would see a 25 point or a 50 point increase. Citing a weakening Rand and increased financial pressures incl the threat of Junk status from ratings agencies the SARB decided to go large and take the bigger jump.

REPO RATE NOW 6.75%

What does this mean?

It means that the banks will pay more to borrow money and they in turn will charge more for the credit they extend. The law sets the maximum that the banks and other credit providers are allowed to charge. Though they could charge less than these limits it is common for most creditors to use the maximum allowable amount of interest.

The Repo Rate change pushes the Prime Rate to 10.25%

This means that the maximum rate that can be charged for a Mortgage Agreement is now 19.85% (normally you can get below this % if you have a decent credit score).

Credit Facilities can now be charged at up to 24.85% and Unsecured Credit transactions at 26.75%.

Didn’t They Announce the Maximum Rates were Changing Soon?

When the changes to the maximum allowable % rate come in in May 2016 the rates will look slightly different (slightly less across the board). The difference will not be dramatic but will offer a slight reduction to the current figures. For example: the max rate on will be 18.75 %as opposed to the current 19.85%

Debt Review?

Some troubled consumers have entered debt review and found that the arrangement allows them to not only cover their monthly necessaries but also see huge reductions on the interest rates demanded by creditors. Many creditors generously allow consumers to pay back their debts without any interest what so ever. Most make big reductions. This saves consumers a huge amount over time and more than makes up for any costs associated with the debt review itself.