THE GOVERNOR of the South African Reserve Bank recently announced an increase in the lending rate by 75 basis points. This means that the repo rate (the rate at which the central bank lends money to commercial banks) will increase from 5.5% to 6.25%, and the prime rate (the rate commercial banks charge their clients when lending them money) rises from 9.0% to 9.75%.
South Africa isn't alone. Countries across the continent-and the world-have also been hiking rates to manage rising prices.
South Africa is the most recent African country to hike rates. Others have included Ghana and Nigeria. And more hikes are expected in the coming weeks.
From a personal finance perspective, increased interest rates have implications for anyone with a mortgage, vehicle financing, student loan, or any other form of debt. Higher interest rates translate to higher debt repayments. For instance, in South Africa the monthly repayment on a R1 million home loan, with a repayment term of 20 years, will increase from R8 997 to R9 485.
Many households are feeling the financial pinch caused by the rising cost of living.
Low-income households are the most vulnerable to high food costs, but middle-income earners don't fare any better. A recent report on South Africa by the consultancy PwC highlighted that 40% of this cohort's expenditure is allocated to food, and 20% goes towards housing and utilities.
However, the time to fix the roof is indeed while the sun is still shining. Before the economic situation goes from bad to worse, the impact of rising prices-and rising interest rates-can be mitigated in a combination of ways.
Five aspects to consider Reduce your debt Try to pay off as much of your debt as possible. As interest rates rise, so do debt repayments. Loans could be tying up funds that could better service another area of your finances.
Bu hikaye Personal Finance dergisinin November 2022 sayısından alınmıştır.
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Bu hikaye Personal Finance dergisinin November 2022 sayısından alınmıştır.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Giriş Yap
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