Beware of unsecured credit after rate hike - expert

Cape Town - Consumers should be wary of taking out unsecured credit to fund consumption spending as the effect on their pocket will be exacerbated by the rate increase, cautioned Izwe Loans CEO Rayanne Jacobson.

The South African Reserve Bank (SARB) governor Lesetja Kganyago announced on Thursday that the repo rate - the interest rate at which it lends money to banks - will increase by 25 basis points to 6.25%. This was on the back of the marked depreciation of the rand, drought conditions and possible related food price increases, looming electricity tariff increases, a deteriorating economic outlook and the likelihood of the US Fed raising interest rates in December.

The bank’s Monetary Policy Committee (MPC) decision was also influenced by unemployment which continues to rise and household expenditure that lost further momentum. Unsecured lending remained subdued and is likely to decline further due to the implementation of new regulations, Kganyago said.