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Cape Town – The new maximum interest rates for all types of credit agreements would reduce the cost of credit for consumers, according to the Department of Trade and Industry (dti).
“The final regulations will bring about reduction of cost of credit when consumers are applying for credit,” dti spokesperson Sidwell Medupe told Fin24 on Thursday.
Medupe gave unsecured credit transactions as an example and said that the maximum interest rates have been reduced from 32% to 27%.
The final notice on the “Review of Limitations of Fees and Interest Rates” was published on November 6 in the Government Gazette.
The final maximum interest rates were calculated at the current repo rate (RR) of 6%.
“For unsecured credit transactions it is RR + 21% per year; for mortgage agreements it is RR + 12% per year; for credit facilities it is RR + 14% per year; for developmental credit agreements it is RR + 27% per year and for other credit agreements it is RR + 17% per year,” the dti said in a statement.
Developmental Credit Transactions have been increased from 32% to 33%.
Medupe said the latter would ensure that credit providers “develop interests or appetite to fund or finance developmental credit agreements, for example small housing developmental projects and loans for school fees.”
DA shadow minister of trade and industry Geordin Hill-Lewis called the new interest rates “a victory for all credit consumers in South Africa” and said it was more so for low income consumers “who were most discriminated against under the old regulations”.
“The new limits add stability and predictability to the monthly credit payments of lower-income consumers, who are also the most reliant on unsecured debt,” Hill-Lewis said.
He said consumers will know exactly what they will pay, now, and when the SA Reserve Bank increases the interest rates.
“They are also easier for consumers to understand, which makes it more difficult for banks to hide fees and extra charges behind opaque calculations,” he said.
