Rate increases by 50 basis points
Category Financial
As most economists had predicted, the Reverse Bank has announced another rate hike at today’s Monetary Policy Committee meeting, bringing the benchmark repo rate up to 6.75% and the prime lending to 10.25%. The decision was largely brought about to counter the effects of the depreciation of the rand, along with increased inflationary pressure.
The Reserve Bank had made it clear over the course of last year that we are currently in a rate hiking phase and that consumers would need to prepare themselves for this. The rate increase, along with issues such as poor economic growth, rising food prices due to drought conditions and the possibility of an increase in electricity tariffs will continue to place additional financial pressure on consumers, who will need to make the necessary financial adjustments to endure the tough times ahead. Future rate increases could be a tipping point for many South African consumers who will no longer be able to service their financial commitments.
Many will be facing the New Year, after the holiday spending-spree, with less money in their back-pockets to pay their monthly bills. This year consumers will need to focus on preparing themselves financially and watch out for increased living expenses and factor these into their household budget. Those who are over-indebted should seek financial advice and first consolidate and pay off short-term debt. They will need to create a budget that allows them to live within their means. If necessary, sell the second car and get rid of credit cards. Selling a home should be the last option, as property is the one long-term asset that should yield a return over time unlike cars, boats and the like. After a consumer has gotten rid of or ring-fenced their short term debt, they should speak to their bank about the options of restructuring their bond.
Author: REMAX SA