Nearly half of South African households can’t afford another interest rate hike, according to a survey conducted by a debt counselling service earlier in June.
The SA Reserve Bank is widely expected to follow the May hike of 25 basis points with another increase when its Monetary Policy Committee (MPC) meets again in July.
It was in preparation for this that Debt Rescue examined consumer expectations regarding future interest rate movements, household financial resilience, affordability pressures and debt repayment risks.
The survey found that 48.5% of respondents did not know how they would cope with higher rates, while 32.2% indicated they would need to make cuts to their budgets.
As households have faced repeated increases in the cost of living over the past few years, the survey suggests that many consumers may now be reaching a point where there is little room to absorb further financial shocks, said debt specialist Neil Roets.
From food and fuel to electricity prices, South Africans have been constantly hammered, and current fuel relief is not enough for the average citizen to recover.
Annaline van der Poel, Chief Partnership Officer at Debt Rescue, echoes this in conversation with Stephen Grootes.
“What we’ve seen is that people are incredibley concerned about another possible rate hike. Most of them are already facing severe distress and the thought of this is creating massive anxiety and mental anguish over and above the obvious facts of how it’s affecting them financially.”
The survey found that 74.2% of respondents feel stressed, worried, anxious or overwhelmed about the prospect of further interest rate increases, while 56.8% are unprepared and 53.5% feel financially insecure about the next six months.
More than 80% were worried about the combined impact of rising fuel prices and interest rates on their household finances.
As a result, more people are turning to credit to be able to make it to the end of the month, van der Poel says.
“Fuel price increases for one have a knock-on effect on living expenses. Most people have already made changest and cuts, so we are really a situation where consumers have no room left… And these factors are completely beyond their control.”
“Whether it’s through loans, credit cards, or store cards, more and more people are relying on credit to put food on the table every month. Some are not making it five days beyond payday and credit is becoming a lifeline literally to live.”