South Africans to pay more on their debt repayments as Sarb hikes interest rates
As of Friday, the repo rate will be 7.25%, while the prime lending rate will be 10.75%
The South African Reserve Bank (Sarb) has increased interest rates by 25 basis points, affecting households with loans and debt repayments. Governor Lesetja Kganyago announced the decision during a Monetary Policy Committee (MPC) meeting held on Wednesday, 21 September 2023. The new rates will take effect from the following Friday, 25 September 2023.
The Reserve Bank aims to curb rising inflation and safeguard the rand's purchasing power. Currently, inflation stands at 4.4%, which is above the target of 3%, with a 1% tolerance on either side. Tertia Jacobs, a treasury economist at Investec, explained that the rate hike is a risk-management measure rather than the beginning of an aggressive hiking cycle.
Kganyago emphasized that the global economic environment remains challenging and uncertain due to events such as the Middle East conflict, Saudi Arabia's oil export disruptions, and the Russia-Ukraine war. These geopolitical issues have contributed to global supply shocks, resulting in additional inflationary pressures. The bank's decision to hike rates is primarily aimed at protecting households from second-round effects, which are indirect price and wage increases that can arise after an initial supply shock.
The repo rate, which banks use to lend to each other, will now be 7.25%, while the prime lending rate for loans will be 10.75%. While this means higher debt repayments for some, Stephan Potgieter, CEO of BetterHome Group Mortgage Origination and BetterBond, noted that the increase is less than the 2% rise seen in 2023, when the prime lending rate was 11.75%.
Written by urgent.news from The Citizen's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
