Borrowers are poorer today by hundreds of rands.
Yesterday’s 50 basis points (0.5%) increase in the repo rate ricocheted through SA banks starting with a higher Reserve Bank lending rate of 6.75%, and a new commercial bank prime lending rate of up to 10.25%.
Yesterday’s announcement added between R60 and R300 on home bonds of between R75 0000 and R2-million and drivers with cars financed at between R15 0000 and R50 0000 paying between R40 to R140-a-month more.
This was according to quick calculations drawn up by chartered accountant and East London-based partner at Charteris and Barnes Gary McLean, and business manager of Kempston Motor Group’s Peugeot, Citroën and Suzuki dealership, Thea-Marie Botha.
McLean said prior to yesterday’s announcement, homeowners last year paid between R400 and R1300 more each month.
“If you had a bond of R750000, the increase in rates since January last year equates to additional monthly payments of R493.33.
Similarly, a bond of R1-million saw an increase per month of R657.76 last year and R1315.53 on a R2-million bond .”
It was unclear yesterday how the new higher interest rate will push these rates up even further, but based on McLean’s calculations, a R750000 bond will command a monthly payment of R7256, on a R1-million rand bond it will be R9674, on a R1.5-million bond R14511 and on a R2-million bond a hefty R19349.
Botha said the prime interest rate rose twice last year by 0.25% from 9.25% to 9.5% in July, and by 0.25% to 9.75% in November.
Botha roughly calculated that vehicle finance for:
lAn entry-level R150000 car will cost R40 more at at R3030 a month;
lA mid-level R230000 car will cost R100 more at R4700 a month;
lA top-end R490000 car will rise by R140 a month to R9790.
She urged buyers to opt for a fixed rate of around 16% saying “your monthly instalment does not change when planning your budget”.
She said interest increases “look small but if the rate goes up more than once a year, it starts adding up”.
McLean said: “The economy is very much in a depressed state and this increase will have a direct impact on households’ disposal income as many South Africans of all income classes have some form of debt – from home loans to credit cards.
“We need to rein in on our borrowing and perhaps buy the cheaper car or the smaller house.”
Rhodes Business School tax professor Matthew Lester blamed disasters beyond South Africa’s control, mainly the slowdown of the Chinese economy, the slump in commodity (raw materials) prices and the drought.
Lester, a member of the influential Davis Tax Committee which reports on tax policy to Finance Minister Pravin Gordhan, said: “Nothing is going our way. This year it’s bring-and-braai. The only solution is, stop borrowing”. — mikel@dispatch.co.za
Interest rate hike to hit pocket hard
Yesterday’s 50 basis points (0.5%) increase in the repo rate ricocheted through SA banks starting with a higher Reserve Bank lending rate of 6.75%, and a new commercial bank prime lending rate of up to 10.25%.
Yesterday’s announcement added between R60 and R300 on home bonds of between R75 0000 and R2-million and drivers with cars financed at between R15 0000 and R50 0000 paying between R40 to R140-a-month more.
This was according to quick calculations drawn up by chartered accountant and East London-based partner at Charteris and Barnes Gary McLean, and business manager of Kempston Motor Group’s Peugeot, Citroën and Suzuki dealership, Thea-Marie Botha.
McLean said prior to yesterday’s announcement, homeowners last year paid between R400 and R1300 more each month.
“If you had a bond of R750000, the increase in rates since January last year equates to additional monthly payments of R493.33.
Similarly, a bond of R1-million saw an increase per month of R657.76 last year and R1315.53 on a R2-million bond .”
It was unclear yesterday how the new higher interest rate will push these rates up even further, but based on McLean’s calculations, a R750000 bond will command a monthly payment of R7256, on a R1-million rand bond it will be R9674, on a R1.5-million bond R14511 and on a R2-million bond a hefty R19349.
Botha said the prime interest rate rose twice last year by 0.25% from 9.25% to 9.5% in July, and by 0.25% to 9.75% in November.
Botha roughly calculated that vehicle finance for:
lAn entry-level R150000 car will cost R40 more at at R3030 a month;
lA mid-level R230000 car will cost R100 more at R4700 a month;
lA top-end R490000 car will rise by R140 a month to R9790.
She urged buyers to opt for a fixed rate of around 16% saying “your monthly instalment does not change when planning your budget”.
She said interest increases “look small but if the rate goes up more than once a year, it starts adding up”.
McLean said: “The economy is very much in a depressed state and this increase will have a direct impact on households’ disposal income as many South Africans of all income classes have some form of debt – from home loans to credit cards.
“We need to rein in on our borrowing and perhaps buy the cheaper car or the smaller house.”
Rhodes Business School tax professor Matthew Lester blamed disasters beyond South Africa’s control, mainly the slowdown of the Chinese economy, the slump in commodity (raw materials) prices and the drought.
Lester, a member of the influential Davis Tax Committee which reports on tax policy to Finance Minister Pravin Gordhan, said: “Nothing is going our way. This year it’s bring-and-braai. The only solution is, stop borrowing”. — mikel@dispatch.co.za
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