More turn to debt review due to hikes

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The number of debt review applications is increasing and banks are expecting more people to default on their car and home loan repayments as the rise in the cost of living takes its toll.

But many consumers are remaining resilient in the face of the economic pinch and in an economy where almost 10 million credit-active consumers have impaired credit records.

Kelli Knutsen, from DebtBusters, said the number of applications received by the debt counselling company increased by 85 percent last year. This year, the number of applications was up 30 percent.

“People struggling to make home loan payments, car payments and other financial commitments are looking for a solution to help them take back control of their finances.

“The average DebtBusters client now spends more than 100 percent of their net income servicing debt, without taking into account their living expenses.

They can no longer afford to pay for their home loans and vehicle finance.”

Sydney Soundy, head of vehicle and asset finance at Standard Bank, said fuel costs were having a “significant impact” on disposable income. This, with the levying of e-tolls and vehicle payment instalments increasing due to the interest rate hike, was creating difficulty for consumers.

“We anticipate that defaults will increase,” Soundy said, adding that the bank was seeing signs of increased risk that could mean there were more repossessions.

However, Steven Barker, the head of home loans at Standard Bank, said there had not been big changes in bond payments.

Calvin Ndlovu, the head of collections and asset finance and retail banking at FNB, said the number of people unable to meet their residential mortgage payments had decreased by 22 percent. There had not been a marked increase in the repossession of homes, he said.

Estate agencies said the market had not been affected by the economy or the interest rate hike.

WesBank spokesman Rudolph Mahoney said arrears on car loans were cyclical and linked to the interest rate and performance of the economy.

WesBank’s view was that lower LSM consumers were more exposed to unsecured debt while the higher LSM consumers were leveraged with secured and mortgage debt.

“The majority of WesBank’s customers have, over the past few years, opted for fixed interest rates to exploit the low interest rate cycle. This is now benefiting them because, as interest rates rise, they are protected.”

WesBank’s arrears levels were “well below” historical benchmarks, although more people were applying for debt review.

The Mercury


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