The significant decline in the number of people who can keep their mortgage accounts up to date clearly illustrates the level of financial distress consumers are currently experiencing.
Historically around 92% of all mortgage accounts were up to date, but it has been dropping quite dramatically in recent times. The latest available figure shows it is down to 88% in the last quarter of last year. That means home loan accounts with arrears have increased by about 50% recently, and it happened in the relatively short time span of 18 months to December 2023.
Globally, inflation has been quite stubborn, and interest rates remain high as a result. In South Africa the repurchase rate (repo rate) of the South African Reserve Bank reached its highest level in 15 years. This means the prime rate, used to price home loans and other consumer debt like car loans and credit cards, is elevated.
High inflation, and the high interest rate response, has been caused by a confluence of factors including the hangover from previous quantitative easing, supply-chain bottlenecks during the Covid pandemic, the Russia-Ukraine war and the recent conflict in the Middle East.
Despite earlier predictions that the high interest rate cycle could turn around in May this year, it is now expected to turn around only next year due to high inflation proving stickier than anticipated.
This story is from the July 13, 2024 edition of The Citizen.
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This story is from the July 13, 2024 edition of The Citizen.
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