What Does a 4% Repo Rate Mean For SA Consumers?
Will The Repo Rate Increases To 4%
The SA Reserve Bank’s Monetary Policy Committee have decided to push up the repo rate by 25 basis points, in January 2022.
This now means that the Repo Rate sits at 4%.
This seems like a small jump from 3.75%. So, should you worry?
The Pattern For 2022 Onwards
In November 2021 the MPC decided to finally begin pushing up the repo rate after it had been sitting at all time lows during the Covid-19 pandemic. In November the rate was bumped by .25% or 25 basis points from 3.5% to 3.75%.
Now that rate has gone up to 4%. This cements in the upwards hiking trend the MPC has been warning would begin. They have been talking about 3 increases in 2022 which if the trend is then followed will have the rate at 4.5% or 4. 75% by year end and likely to carry on the upward trend in 2023.
Over time, this will mean that people who are making use of credit (people with debt) will have to pay more and more towards the interest portion of their debt. And this, of course, is not just on a single debt but all their debts.
‘people who are making use of credit (people with debt) will have to pay more and more’
Without getting too technical, consumers do not get charged the repo rate. No, that rate has to do with how much the banks have to pay to borrow from the Reserve Bank.
The rates the banks can charge consumers are set much higher. So, if the repo rate is 4% you end up with a prime rate plus what the banks add to make profit from you. This can all add up pretty quickly and become a big issue because it is doubtful you only have one debt. You probably have many debts and suddenly you will have to make a few extra hundred rand payments on many of them (even larger if you have larger debts).
You Are Going To Feel It
So, even though the repo rate change is small, this is magnified by the way the prime rate is calculated (based of the repo rate) and consumers will feel a big change for even such a small adjustment.
With the announcement, we now have further evidence that we are now ‘locked’ into a 2 year increasing debt/credit rate cycle. If you are struggling to make ends meet already (and who isn’t?) then you are going to come under increasing pressure in repaying your debts in 2022 and 2023. If you feel this way, please talk to a professional Debt Counsellor who can help you make needed adjustments or even take legal action to protect your assets.
