Consumers turn to loans to cope with the high cost of living in South Africa | So Good News


Economists at Nedbank say families in southern Africa are turning to credit unions to help tackle the country’s growing economic problems.

Regarding September’s income and credit growth, economists said that credit growth increased significantly in September at rates higher than expected but will probably start to slow down after the holiday season.

Deposits rose by 0.7% month-on-month in September, raising the annual and six-month growth rate to 8.8% from 8.1% in August. This figure was higher than Nedbank’s and market forecasts of 8.1% and 8.3% respectively.

Banks are also lending more, the bank said.

Growth in private sector loans rose sharply to 9.7% year-on-year, the highest since December 2015, beating Nedbank’s market forecasts of 8% and 8.2% respectively.

“All major credit sectors rose, but the biggest contributor was property-backed credit, which accounted for 50.9% of total credit. Housing demand remained strong, with annual growth steady at 6%, while the growth in purchases and lending rose to 8.9% from 8.7%,” he said.

Demand for other loans and advances, including unsecured loans, remained strong at 15.6% year-on-year.

“While annual growth in the sector mainly reflects the results, monthly growth was also exceptional for the fourth consecutive month at a rate of 7.3%,” Nedbank said.

The ‘money and bills’ category has seen a steady rise over the past four months. Excluding the group, bank credit growth rose to 10.5%, the highest since January 2009, driven by demand for corporate loans.

According to Nedbank, demand for household loans remains strong, rising by 7.2% year-on-year from 7.1% in August.

“The growth of public debt and credit cards increased significantly, perhaps to show distressed borrowing as consumers are increasing their spending in light of the rising cost of living,” it said.

Subsidized credit remained strong but rose slightly for the third straight month in September as stronger interest rates took effect.

Data from consumer credit reporting agency TransUnion has shown that credit initiations continued to rise amid South Africa’s economic crisis in September.

However, it said that despite the resurgence of cards, recent volumes remain below pre-pandemic levels.

According to the group, the average credit balance per account is R36,800, while the balance on the account is R21,200.

Nedbank noted that credit growth has been stronger than expected, and will remain strong in the last quarter, supported by high consumer spending over the festive period.

However, it said household demand will slow as higher mortgage rates erode personal spending, boost consumer confidence and make households cautious about taking on too much debt.

Read: Average credit card debt in South Africa – how much debt we have


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