South African Federation of Trade Unions general secretary Zwelinzima Vavi said the increase would be devastating for small businesses and working people already struggling to pay loan instalments.
“Unable to keep up with the rising costs of servicing their loans and credit facilities, small businesses absorb the increased costs through pricing of their products. In the intermediate period, interest rates are therefore inflationary. In the longer term, they [small businesses] default, go bankrupt and retrench their workers,” Vavi said.
He said many employees had very little to spend from their salaries.
“FNB reported 80% of income of middle-income earners, the real holders of credit and loans, is depleted within five days of receiving it.”
This week TimesLIVE reported Nedbank economist Isaac Matshego said rising pressure on consumers and businesses from high interest rates resulted in more people defaulting on home loans.
“Anecdotal evidence points to rising pressure on consumers and businesses from the high interest rates, with defaults on home loans in particular ticking higher. Demand pressure on inflation is virtually nonexistent, but the Reserve Bank will continue to fret about the risk of an inflation spiral due to the shocks on the economy,” Matshego said.
South Africans took to social media to voice their frustration.
Social media user Katleho James said: “People are going to lose their houses and cars. It is only a matter of time.”
Nemisha Maharaj Kraamwinkel said: “The Reserve Bank continues to use excuses to increase the interest rates. The banks are going to crash because they are going to foreclose and repossess peoples homes, people are going to be blacklisted and then look at the government for RDP homes and grants.”
Here is how other people reacted:
South Africans brace for increased car and bond instalments after interest rate hike
Image: File/ Freddy Mavunda
There are concerns more people paying home and car loans might default on payments as instalments are set to increase after the Reserve Bank's interest rate hike this week.
On Thursday Reserve Bank governor Lesetja Kganyago announced an interest rate increase of 50 basis points (bps) to 8.25%. In January the interest rate was at 7.25%. The prime interest rate used by banks to lend money to customers increased to 11.75%.
South African Federation of Trade Unions general secretary Zwelinzima Vavi said the increase would be devastating for small businesses and working people already struggling to pay loan instalments.
“Unable to keep up with the rising costs of servicing their loans and credit facilities, small businesses absorb the increased costs through pricing of their products. In the intermediate period, interest rates are therefore inflationary. In the longer term, they [small businesses] default, go bankrupt and retrench their workers,” Vavi said.
He said many employees had very little to spend from their salaries.
“FNB reported 80% of income of middle-income earners, the real holders of credit and loans, is depleted within five days of receiving it.”
This week TimesLIVE reported Nedbank economist Isaac Matshego said rising pressure on consumers and businesses from high interest rates resulted in more people defaulting on home loans.
“Anecdotal evidence points to rising pressure on consumers and businesses from the high interest rates, with defaults on home loans in particular ticking higher. Demand pressure on inflation is virtually nonexistent, but the Reserve Bank will continue to fret about the risk of an inflation spiral due to the shocks on the economy,” Matshego said.
South Africans took to social media to voice their frustration.
Social media user Katleho James said: “People are going to lose their houses and cars. It is only a matter of time.”
Nemisha Maharaj Kraamwinkel said: “The Reserve Bank continues to use excuses to increase the interest rates. The banks are going to crash because they are going to foreclose and repossess peoples homes, people are going to be blacklisted and then look at the government for RDP homes and grants.”
Here is how other people reacted:
TimesLIVE
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