Electricity, rates, municipal charges now equal bond repayments – debt counsellors

Home loans have increased as much as 40% from the repo rate low point in late 2020. SUPPLIED

Home loans have increased as much as 40% from the repo rate low point in late 2020. SUPPLIED

Published Jul 5, 2024


The National Debt Counsellors Association (NDCA) has warned that many of their consumers, particularly homeowners were seeing their combined spending on electricity, rates, and other municipal service charges in many cases being more than what they spent on their bond repayments.

NDCA chairperson Benay Sager yesterday said South Africa should strive to reverse the situation over the next few years in such a way to help all consumers, particularly homeowners to be able to build wealth and build some equity in their homes.

“If the situation carries on and operational expenses such as rates, electricity, water, and all other municipal service charges continue to exceed the amount that we’re paying for a bond, it just makes it more and more difficult, not only for current homeowners but also to attract future homeowners,” Sager said.

“I think the real meaningful change will happen for consumers when those charges are lower than bond repayments…”

Chaz Jaftha, head of credit and analytic at short-term lender Wonga, told Business Report that there needed to be a more comprehensive approach to alleviating the cost-of-living pressures for consumers to effectively cope with the current financial strain outside of careful planning and budgeting.

“This could include significant reductions in essential costs. Beyond the minor decrease in fuel prices, substantial decreases in other essential costs such as electricity tariffs, interest rates, and food prices would be necessary,” Jaftha said.

“Some of this could come through better policy implementation and better management of state resources by governmental departments.”

Wonga said the reduction of interest rates was expected to come in two cuts before the end of the year, which would provide relief to consumers with high credit exposure such as vehicle asset finance and home loans.

Home loans have increased as much as 40% from the repo rate low point in late 2020.

“With current CPI figures at 5.7% for May, inflation is edging closer to the Reserve Bank’s target range midpoint. These measures could offer substantial relief to South African consumers,” Wonga said.

According to the Input Cost-Monitoring (ICM) report published by the National Agricultural Marketing Council (NAMC), petrol and diesel prices increased significantly by 53.6% – up from R15.79/litre to R24.25/litre – from June, 2018 to June this year, and 47.7% – from R14.19/litre to R20.96/litre, respectively.

During May, the nominal cost of the NAMC’s 28-item urban food basket amounted to R1 273.02 compared to the R1 263.47 reported in April. This represented a monthly increase of 0.8% and a year-on-year increase of 7.6%.

The report showed that between May this year and May last year, among these 28 items,12 witnessed price increases that exceeded the inflation target set by the South African Reserve Bank of 6%.