Will interest on secured credit decrease?

By Staff Writer
Government are proposing that the maximum interest rates on unsecured loans be reduced by eight percent. Lenders including banks and microlenders can presently charge as much as 32.65% but this will be slashed to a maximum of 24.78% if government gets its way.
 
The news has already impacted financial institutions offering unsecured loans. At the close of trade Tuesday, Capitec Bank Holdings’ stock reached its lowest value since May 2008. The stock dropped by 7.81% closing the day at R425. Nedbank and Standard Bank also experienced a drop in their stock prices, reducing by 4.57% to R235.77 and 4.41% to R152.47 respectively.
 
Following the collapse of African Bank last year, another financial institution that offered unsecured loans, the financial services industry in South Africa has been re-examining its structures and regulations to help prevent a similar collapse happening in the future.
 
According to reports the Department of Trade and Industry said: “Research studies and statistics show that South Africa has a worrying high level of over-indebtedness. The DTI is currently scheduling sessions with affected stakeholders as part of the consultative process during the month of July.”
 
While a decrease in the maximum interest rate on unsecured loans has not yet been finalised, other changes to the financial services industry are taking place. These include the Retail Distribution Review, which will introduce reforms to the financial services industry in a series of phases. Among these changes are changes to the fees structure of financial advisers.

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