Interest rate hike great for savers, worst nightmare for debtors

South African Reserve Bank (Sarb) governor Lesetja Kganyago said on Thursday the bank would increase the repo rate by 50 basis points.

This means the repo rate, which is the rate at which the Sarb lends money to banks, will rise to 6.75%.

The prime lending rate, the figure charged by banks to customers, will increase to 10.25%.

The announcement was made in the capital after a three-day meeting of the Sarb’s Monetary Policy Committee (MPC).

This comes after the bank increased rates by 25 basis points in both July and November 2015.

Earlier today, Statistics South Africa announced that producer price inflation had risen to 4.8% year-on-year for December from 4.3% in November.


“This news will be bad news for heavily indebted consumers who will see significant increases in the cost of servicing debt. For savers

this is an opportune time to save and invest.” says Gerald Mwandiambira , SASI acting CEO.


“This announcement is a signal that 2016 may prove to be a tough year financially for South Africans who are highly indebted. The fact that most people

do not have emergency funds or a buffer on monthly expenses means that we may see an uptick in financially distressed people and default judgements. In order

to try beat the hike, those who can but seek ways of earning a secondary income or significantly cut on expenses.” adds Gerald.