Banks hike prime leading ratesComment on this story
Johannesburg - Banks hiked their prime lending rates to 9.25 percent on Thursday after the repo rate was increased by 25 basis points.
Standard Bank announced its lending rates would increase by 0.25 percent.
“The change in the interest rate cycle should indicate to consumers that lending in general will be costing more,” Standard Bank personal banking head Sugendhree Reddy said in a statement.
“Consumers are urged to continue reviewing their income and debt portfolios and adjusting their consumption patterns.”
First National Bank chief executive Jacques Celliers said consumers were already heeding calls to reduce borrowing and the bank had seen a decline in consumer credit demand.
“The SARB has 'feathered' rates higher this year to reduce the impact on consumers. However, we believe this current rising cycle has yet to run its full course and we still see further hikes in coming months,” he said.
“Certain retail loans can be consolidated at lower rates. At the same time, this is good news for investors seeking interest income.”
FNB's chief economist Sizwe Nxedlana said the bank expected SARB to raise interest rates further.
He said the country had a large current account deficit and there is insufficient saving to meet investment demand.
Absa hiked its prime lending rate and variable mortgage interest rates.
Nedbank said its prime overdraft rate, the vehicle and asset finance rate, and the mortgage rate applicable to home loans, would increase to 9.25 percent.
The interest rate hike posed a threat to consumers already struggling with debt, DebtBusters CEO Ian Watson said.
He said the current financial environment continued to be difficult.
“Consumers already struggling with debt need to prepare themselves for greater challenges as the interest rate hike will have a severe impact on their financial situation,” said Watson.
SA Reserve Bank governor Gill Marcus said the bank's monetary policy committee (MPC) had decided to continue its “gradual normalisation path” and raise the rates, effective from Friday.
“The monetary policy stance remains supportive of the domestic economy, and, as before, any future moves will be gradual and highly data dependent.”
She said the year-on-year inflation rate as measured by the consumer price index (CPI) for all urban areas measured 6.6 percent in May, up from six percent and 6.1 percent in March and April 2014 respectively.
The economic growth outlook has deteriorated since the last monetary policy committee meeting against the backdrop of the protracted strike action in the mining and manufacturing sectors, Marcus said. - Sapa