THE INCREASE OF REPO RATE
By: Asnath Bila
Twitter: @ASNATH
Email: bilaasnath@gmail.com
The Marginal Propensity Consume (MPC) increased the repurchase rate by 50 basis points to 8.25% per annum with effect from 26th May 2023. The decision was unanimous. At the current repurchase rate level, policy is restrictive, consistent with elevated inflation and risks.
Mametja Cindy, a bond house owner, “When repo rate increases it affects the prime lending rate, lifestyle, and the interest rate that someone will be charged for any loans or credit facilities you use.” That leads to paying more for clothing accounts or paying back any money you may own in terms of monthly budget and that can affect the ability of paying bills.
(Image: Bila Asnath)
Repo rate affects businesses, particularly those that rely on borrowing to finance their operations. When the rate is increased, businesses are likely to face higher borrowing costs which can reduce their profits and investment in a new project.
Mbunda Pfuxelelo, a bond house owner said, “Being a bond house owner is not easy, people may think that we are enjoying it. Firstly, you must cut out some of your financial needs so that you can manage to pay for the house and now they have increased the rate, which makes the situation worse.”
(Image: Bila Asnath)
An increased repo rate will push your interest rate up unless you have negotiated a fixed interest rate on your loan facility. It affects the amount of interest consumers will pay on a loan from the bank, from bonds through to car finance. It also affects the payment amount on bonds and loans. Interest bearing instrument products stand to benefit from such increases.
When the repo rate increases, mortgage rates rise accordingly making the cost of servicing home loans more expensive, as a result, homebuyers may find it more challenging to enter the housing market. Existing homeowners with variable interest rates may also face higher monthly payment, impacting their disposable income leading to financial stress.
FNB Chief economist, Mamello Matikinca-Ngwenya said, "The continuation of aggressive rate is partly underpinned by aggressively tightening global financial conditions, the weaker domestic currency and domestic wage pressures as workers demand higher wages to compensate for the higher cost of living.”
“We can expect further rate increase at the last two MPC meetings for the year, at a similar pace to the US fed, if inflation does not cool markedly. This will add further pressure on consumers in the near term while it takes time for the higher interest rates to temper inflation,” She added.
The interest rate rises on all debt including clothing account and personal loans. Borrowing money from the bank becomes more expensive which slows down investment and money supply in the market.
find the audio below of Mabunda Pfuxelelo.
https://on.soundcloud.com/wY4uh
Comments
Post a Comment