South Africa’s prime lending rate is at the highest it has been since 2009 after the South African Reserve Bank (SARB) on Thursday hiked the interest rate once again by a shocking 50 basis points (BPS).
This was the ninth consecutive rate hike since policy normalisation started in November 2021, bringing borrowing costs to the highest since May 2009 in a bid to curb runaway inflation.
Headline inflation breached the upper end of the SARB’s target range of 3%-6% in the second quarter of 2022 and is forecast to remain above it until the third quarter of this year.
Andra Nel, Purpose Manager at KFC's Add Hope, told Business Report that many South Africans are reeling as they process the announcement of a further 50 basis points increase at the MPC from the South African Revenue Bank.
“We know a lot of South Africans are still coming to terms with the impact of these regular and frequent increases, but nobody actually expected this size of an increase, but the reality is that South Africans are now starting to feel the pressures not just from an everyday living cost perspective but also from food prices that are continuing to increase. Farmers and food producers are really trying to internalise additional expenditures, but also, it will eventually be impacting the end consumer,” she said.
Nel further said: “The reality of it is that with three to six million children going hungry in our country every single day, this is likely to worsen as these impacts of these rate increases continue. So what we have to do as South Africans we have to rally together and help where we can, so through Add Hope, we are continuing to bolster our support of the over 130 non-profit organisations that we are supporting and making sure that we are doing everything we can to help as many South Africans as we possibly can.
‘’South Africans can continue to help by donating to Add Hope and contributing their R2 every time that they visit a KFC restaurant and, in so doing, hoping that they will be more hope as we continue on this journey. It's been an incredible journey. We've served over 32 million meals just last year alone, but we know that more needs to be done, and we're looking forward to partnering with South Africa in these endeavours.”
Hayley Parry, Money Coach and Facilitator at 1Life's Truth About Money, says it is not good news for consumers.
“The SARB governor says that inflation pressure remains a risk and that load shedding is pushing up the cost of living, and that is why this increase was double what economists were predicting. So what does that mean for your and my bank account? Well, to give you an example, If you were paying off a 2 million rand home loan as of the end of March, your interest repayment would have increased by R680 this month, and since the interest rates increased cycle began, by just over R5500 more, so it is not good news if you're servicing debt. If you have got any money at the moment which you can use to pay down your debt, now would be a good time to do that because the cost of debt is continuing to increase,” Parry said.
Kganyago said inflation expectations had increased strongly over the past year, forcing the bank to revise its 2023 headline inflation forecast significantly upwards to 6% from 5.4% previously due to higher prices of core goods and food in the near term.
However, Kganyago said food and fuel inflation was expected to ease, resulting in a headline forecast of 4.9% for 2024 and 4.5% for 2025.
“Load shedding may additionally have broader price effects on the cost of doing business and the cost of living, in particular as diesel consumption increases.”
Samuel Seeff, chairman of the Seeff Property Group, says the outlook for the property market remains stable and active despite the decision by the SA Reserve Bank to hike the repo rate by another 50bps to 7.75%.
He says further that the property market is mindful that the SARB faced a difficult decision. The Eskom energy crisis, weak business confidence, deterioration of the CPI inflation to 7% in February (from 6.9% in January), and pressure on the currency left little room to manoeuvre.
“That said, we believe the 50bps is a bit steep, and the SARB could have kept it to 25bps. Nonetheless, the hike was largely expected and already factored in by the market,” says Seeff.
“While not ideal, the rate is still below the historic average of the last 20-30 years, and we are still seeing a strong, stable property market,” he further said.
This is how much more you will pay on a home loan repayment following the latest interest rate hike:
- R750 000 bond – extra R255 from R7 614 to R7 869
- R900 000 bond – extra R306 from R9 137 to R9 443
- R1 000 000 bond – extra R341 from R10 152 to R10 493
- R1 500 000 bond – extra R511 from R15 228 to R15 739
- R2 000 000 bond – extra R339 from R20 305 to R20 985
- R2 500 000 bond – extra R424 from R25 381 to R26 231