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Johannesburg – The South African Reserve Bank (SARB) governor, Lesetja Kganyago on Thursday announced that that the bank would increase the repo rate by 50 basis points.

The interest rate hike was announced following a three-day meeting of the SARB’s Monetary Policy Committee.

This means the repo rate, the rate at which the SARB lends money to banks, will rise to 6,75 percent.

Leading vehicle and asset financier WesBank reacted quickly to this announcement, saying the rate hike will affect buyers who have vehicle finance agreements structured around a linked interest rate.

WesBank also said household debt levels in South Africa remain at high levels – with more than 75 percent of disposable income servicing debt.

Rudolf Mahoney, head of brand and communication at WesBank, in a statement said given the current economic conditions this hike comes as no surprise, but “it will not be welcomed by consumers”.

“Household budgets are under tremendous pressure. The interest rate has increased 225 (2,25 percent) basis points in 24 months, meaning those who have had car and home loans since the start of the rate hiking cycle will now really start feeling the effects,” Mahoney said.

The Reserve Bank’s decision to hike the interest by 50 basis points, bringing the effective repo rate to 6,75 percent will make the prime lending rate change to 10,25 percent.

The SARB also increased rates by 25 basis points in both July and November 2015.