Decrease in Interest Rate:
Today for the first time in over the year, credit consumers saw a glimmer of hope as the Reserve Bank announced a decrease in the repo rate by 25 basis points, which results in a reduction in the interest rates that are charged to consumers.
After meeting in Pretoria on the 18th of July, The Reserve Bank’s Monetary Policy Committee announced a reduced repo rate, the first decline since March 2018, which will positively affect the prime lending rate, and ultimately lower the rate at which credit providers and banks can lend to consumers.
As at the end of 2018, 71.90% of all disposable income from households was spent on debt which includes home loans, car loans, credit cards and personal loans, this excluding the cost of debt; the interest paid on these loans.
With the cost of living continuously on the rise, which we all experience in rising food and ever-increasing fuel prices, this could be the opportunity for consumers to receive some relief in their ability to meet their monthly commitments.
How will this aid credit consumers?
A drop in interest will certainly assist consumers with credit repayments, and possibly free up some disposable income making it easier for some South Africans to get by each month. For those that are savvy, it would be wise to put any disposable income into savings.
GetBucks, an online credit provider that aims to help customers manage their money better, hopes to see consumers being more responsible with their money, and their debt.
“A decreased interest rate might be just what some customers need to clear up their debt and start fresh, says Mark Young, CEO of GetBucks South Africa. Through our finance 101 guides and budgeting tools, we urge our customers to budget, to save, and should they require credit, ensure that the type, amount and term of the credit match the need that they are borrowing for. Hopefully, instead of being lured by a lower interest rate, consumers will take this opportunity to decrease their overall debt.” concludes Mark
Whilst lower interest rates can be good news for borrowers, it’s up to South Africans to take advantage of the change, reviewing their budgets, adjusting their spending habits and seeing where they can improve their financial wellbeing.