Sarb increases repo rate by 25 basis points - what it means

Cape Town -  The South African Reserve Bank’s (Sarb) Monetary Policy Committee (MPC) hiked the repo rate by 25 basis points to 6% per annum, effective from 24 July 2015, its governor Lesetja Kganyago announced on Thursday.

Banks will raise their prime lending and variable mortgage interest rates by the same magnitude to 9,5% per annum, according to Jacques du Toit, a senior economist at Absa.

AS IT HAPPENED: How repo rate increase will affect you

"The Reserve Bank remains concerned about the outlook for economic growth that is constrained by severe electricity shortages, low levels of consumer and business confidence, inflationary pressures and the possibility of rising interest rates in the United States," he said.

"The forecast is for interest rates to be hiked again later in the year and through the course of 2016 in an attempt to contain inflation," said Du Toit.

"Consumers with debt will thus be affected by rising debt repayments as a result of the higher interest rates, which will further add to their financial strain.

"Banks will continue to monitor economic and consumer-related trends in decisions regarding risk appetite and lending criteria, which will affect the accessibility and cost of credit," he said.