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Consumers under more strain as interest rate goes up

In the second interest rate hike for 2015, the South African Reserve Bank hiked the repo rate to 6.25%.

South African money

This follows a 25 basis point increase in July.

This brings the prime lending rate to 9.75%.

Jacques Du Toit, senior economist at Absa said the announcement came against the background of expected inflationary pressures due to the lagged effect of the severe drought on food prices, a weakening rand exchange rate and the prospect of rising interest rates in the United States before year-end and during next year.

Further hikes in lending rates are forecast for 2016, which will cause debt repayments to increase, contributing to additional financial strain on consumers.

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Banks will continue to monitor economic and consumer-related trends, possibly impacting their risk appetite and lending criteria.

The rand, which was trading at R14.15/dollar shortly before the announcement, quickly weakened to R 14.20, but by 15:29 was trading back at R 14.15.

Fin 24

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