Consumers are feeling the impact of interest rate hikes, according to the latest data released by DebtBusters, a leading debt counselling company. In the fourth quarter of 2023, households in South Africa were spending a significant portion of their take-home pay on debt, with 62 percent of their income going towards servicing their loans.
The findings of DebtBusters’ 4th quarter debt index revealed that high-income earners, specifically those earning more than R35,000 a month, were particularly burdened by debt. These individuals were allocating 71 percent of their income to credit-related expenses. The main contributors to their indebtedness were home loan installments and vehicle repayments.
Benay Sager, CEO of DebtBusters, expressed his concerns about the situation, stating, I think we are now fully seeing the impact of the interest rate increases on consumer finances. He highlighted that almost all of the consumers who sought debt counselling in the fourth quarter of 2023 had personal loans, with 95 percent of them being in this category. Additionally, 24 percent had short-term or payday loans, while 28 percent carried credit card debt. Sager emphasized that unsecured credit continues to be a lifeline for many consumers.
2023 proved to be a challenging year for South African consumers, and the debt index indicates the extent of the financial strain. As interest rates rose, consumers found themselves dedicating a significant portion of their income to debt repayment, limiting their ability to cover other essential expenses.
The impact of this debt burden can be felt across the board, as individuals struggle to maintain a healthy financial balance. The repercussions may include limited disposable income and reduced purchasing power, which can negatively affect the overall economy.
It is important for consumers to be aware of the consequences of taking on excessive debt and to seek effective debt management strategies when necessary. Debt counselling services, such as DebtBusters, can provide guidance and support to those facing financial challenges.
As the year progresses, it will be crucial for both consumers and financial institutions to closely monitor the situation. By staying informed and seeking appropriate assistance, individuals can work towards regaining financial stability and minimizing the impact of interest rate hikes on their daily lives.
In conclusion, the significant portion of income being used to service debt by South African households is a cause for concern. DebtBusters’ 4th quarter debt index highlights the challenges faced by consumers, specifically high-income earners. By addressing these issues and seeking appropriate debt management solutions, individuals can aim to improve their financial standing in the face of interest rate hikes.
