Isaac Moledi

Isaac Moledi

It looks like higher interest rates are set to stay for some time and this should be foremost in the mind of every borrower as they plan their holidays and start budgeting for 2008.

It is not surprising that household indebtedness has risen from 71 percent in June 2006 to 77 percent in November this year - largely as a result of higher rates - because we love indulging ourselves in unnecessary spending.

Experts say we should be wary of further rate hikes when considering new purchases on credit. They say make use of debt consolidation methods when necessary, to reduce the overall cost of loans.

In addition, experts say since December presents you with many opportunities: people are paid earlier than usual, many people receive Christmas bonuses and compulsory spending on items such as school or college fees are absent from year-end budgets, we should take this as the ideal time of year to reduce debt.

Says Johan Thomas, CEO Retail Credit, FNB: "Most people delay their largest credit purchases such as vehicles and houses until January."

This year Thomas says the trend may be amplified due to the cost of higher rates.

For example, the monthly repayments on a R600 000 mortgage over 20 years have risen by 28 percent after this month's hike to R7 680, from R5 990 when prime was 10.5 percent in June last year.

So, take care and look after your money. You will need more of it in 2008.

l Your Money column will return on January 8.