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Former Wits SRC President Mcebo Dlamini. Picture Credit: Gallo Images
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Rate hike could be the straw that breaks the camel's back

By unknown | Apr 11, 2008 | COMMENTS [ 0 ]

Staff Reporter

Staff Reporter

With a number of consumers already struggling to make their bond repayments, yesterday's 50-basis rate hike could be the straw that breaks the camel's back.

According to Gavin Opperman, managing executive of Absa Home Loans, the 450-basis point increase in interest rates since June last year has caused the average monthly repayment on a mortgage loan to rise by a total of 32percent.

He said that for a R500000 mortgage loan over a 20-year period, the monthly repayment has increased from R4992 in mid-2006 when the mortgage rate was 10,5percent, to R6584 at a mortgage rate of 15percent - an increase of R1592 per month. The latest 50-basis point hike in the mortgage rate added R184 to the monthly repayment.

"However, interest rates have probably reached a peak now, with the economy showing definite signs of cooling off over a wide front and inflation expected to be lower in the second half of the year", he said.

Ian Wason, MD of home finance experts BondBusters and its debt counselling partner DebtBusters, said the increase would place a huge chunk of SA's middle class under immense pressure.

Marcel de Klerk from Absa vehicle and asset finance , said: "The current economic situation has already pushed vehicle prices up which in turn impacts the affordability of the vehicles in terms of the National Credit Act."


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