The weaker Rand, rocketing fuel prices and the steep electricity and municipal tariff increases that are taking effect in many cities and towns this month could delay many families’ hopes of becoming home owners – especially if they start borrowing more to make ends meet.
So says Rudi Botha, CEO of SA’s biggest bond originator BetterBond, who notes: “SA households have come under increasing pressurE, in response it seems that many consumers are now taking on more debt again.
“We are concerned that this could easily reverse the gains made over the past 10 years as South Africans worked really hard to pay off their debts, and steadily reduced the household debt-to-income ratio from 86,5% in 2008 to the current 72%. Particularly worrying is the rise in rate of unsecured borrowing, which includes personal and micro loans, credit card balances and overdrafts.”
This means, says Botha, that a bigger and bigger percentage of the average consumers’ monthly take-home pay is being used to repay “bad debt” rather than “good debt” such as a home loan. “What is more, this could get worse due to further fuel price hikes and this year’s round of municipal tariff increases, while the stagnant economy is making it difficult for employers to offer wage increases that would improve the situation.
“And prospective buyers whose disposable incomes are diminished by additional debt will find it more difficult over the coming months to qualify for home loans, even though the banks are currently eager to lend to them.”