Ian Wason, MD of debt management experts BondBusters and its debt counselling partner DebtBusters, says the increase will almost certainly place a huge chunk of South Africa's middle class under immense pressure, as an increase in interest rates on homeloans have a relatively far larger effect that credit cards due to the relative interest rates charged.
"With a number of South Africans already struggling to make their bond
repayments, this rate hike could just be the straw that breaks the camel's
back. If buyers hadn't budgeted for a possible increase when they first took
on their current home loans we could see a number of families defaulting in
their payments - especially with the rising costs of fuel and food and an
imminent increase in electricity."
With a number of clients already on his debt counselling books, Wason fears
that if financing a property - the one remaining asset for many of these
families- continues on the up and up, people may have to give up their homes because they can no longer afford the repayments on their short term debt on top of financing their homes.
"Before the credit act came into place in June last year, South Africans
racked up huge sums of short term debt. With the constant increase in the cost of living, people need to find a solution to curbing the constantly
increasing bills. In many cases, the only solution is to sell their homes to
free up some money."
Despite all the gloom, Wason says many people can avoid giving up their homes if they act quickly. By applying for Debt Consolidation, that is to
consolidate all your short term debt into your home loan, you may be able to
avoid taking drastic steps. "While it isn't always advisable to stretch your
short term debt over the long term, the rate you will enjoy on your home loan
will still be cheaper than any other form of finance, even with the recent
rate hike. By using an expert in the field, you may be able to make your
monthly repayments affordable again."
Another option would be to explore debt counselling, a National Credit Act
approved process that more and more South Africans are turning to for help.
"The number of people that have come to us over the last few months has been on an exponential increase. I expect this number to rise even further after the recent rate hike - people need professional help in sorting out their