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Question of the Day: How do you normally pay for purchases in stores?
Rates gone up by 50 basis point
- Thread starter Lord Anubis
- Start date
R38
Lord Anubis
Expert Member
Not sure if this is still allowed or not but in the past you could change banks with regards to a home load and consolidate some debt into it e.g. car, credit cards, overdrafts etc..only problem is you start off at square one though, but you have a little bit more money in your pocket and unfortunately "lose" all the money you paid already....but that's a last resort kinda thingy
Its still done....the thing is
Yes, you're back at square one, and if you do not know how to budget or save correctly, you're pretty much screwed financially...cos then...you'll always be at sq1
The bank will only grant extra dependent on affordability and the evaluation of the property eg: if the property is valued at R100K and your bond is on R150K...they wont grant that extra cash...but if the value is R800K and the bond is currently on R300K - they will approve that extra bit if needed.
Jase
Executive Member
The sad reality is that not only do we pay back more on our debt, everything else goes up which in turns increases consumer spending and also increases consumer debt as it will take consumers longer to pay off existing debt.
Example: I put a little extra into my bond / savings each month. That amount has steadily decreased to cover my extra expenditure on my bond and car repayments. Fuel / Food / clothing etc. has also hiked considerably and I am currently covering that from what I used to put into savings.
Example: I put a little extra into my bond / savings each month. That amount has steadily decreased to cover my extra expenditure on my bond and car repayments. Fuel / Food / clothing etc. has also hiked considerably and I am currently covering that from what I used to put into savings.
I think he had to do it... Inflation is rising uncontrollably and people are in so much credit that they can't handle it...
I suppose it is unfair on the people who are already knee deep in credit but its their own fault for not planning their finances properly.....
If nothing gets done, it will be the same as the USA here... Apparently they spent more than they earned in 2006 and lent the rest... The sub prime problem in the US has reached uncontrollable proportions. I think this NCA is a good thing, (even though it hasnt been implemented properly) and stops the financial institutions from being greedy and lending out too much...
And Jase, consumer spending does not increase? how do u figure that.... Car and house sales are already slowing slightly... Consumer spending is a good thing, but not if its only on credit surely?
And btw, how else should you stop inflation? I never did economics so i have no bloody clue... I know you can give out bonds to decrease money supply and all that stuff but, i dont think there is any other way.. Any people who know about this stuff welcom to correct me..
So all the people complaining to tito, i think his job is harder than you think...
Must post credible solutions instead of saying our politicians are stupid etc..
We comment without fully understanding the complexities of the situation..
I suppose it is unfair on the people who are already knee deep in credit but its their own fault for not planning their finances properly.....
If nothing gets done, it will be the same as the USA here... Apparently they spent more than they earned in 2006 and lent the rest... The sub prime problem in the US has reached uncontrollable proportions. I think this NCA is a good thing, (even though it hasnt been implemented properly) and stops the financial institutions from being greedy and lending out too much...
And Jase, consumer spending does not increase? how do u figure that.... Car and house sales are already slowing slightly... Consumer spending is a good thing, but not if its only on credit surely?
And btw, how else should you stop inflation? I never did economics so i have no bloody clue... I know you can give out bonds to decrease money supply and all that stuff but, i dont think there is any other way.. Any people who know about this stuff welcom to correct me..
So all the people complaining to tito, i think his job is harder than you think...
Must post credible solutions instead of saying our politicians are stupid etc..
We comment without fully understanding the complexities of the situation..
The sub prime problem has nothing to do with too much debt, but everything to do with the way the debt was repackaged and sold off. It was a ticking time bomb - let's hope that the Feds can contain the explosion. In any case, this is in no way related to our interest rate hikes locally.I think he had to do it... Inflation is rising uncontrollably and people are in so much credit that they can't handle it...
I suppose it is unfair on the people who are already knee deep in credit but its their own fault for not planning their finances properly.....
If nothing gets done, it will be the same as the USA here... Apparently they spent more than they earned in 2006 and lent the rest... The sub prime problem in the US has reached uncontrollable proportions. I think this NCA is a good thing, (even though it hasnt been implemented properly) and stops the financial institutions from being greedy and lending out too much...
The rate hike was done to curb inflation.
In my opinion (expressed at length on this forum as well as on 702's The World @ 6 a week ago) it's not going to work - it is going to result in ever more repossessions, but that doesn't really matter to the economy. Food price inflation, by the way, is currently in the double figures, so we are in for a rocky ride anyway.
I wasnt saying they were directly related. I just said that if the mpc dont do something about people taking so much credit we'll end up with a similar situation cos every1 will default on their loans...
And actually it did have an impact cos many analysts felt that the mpc should keep interest rates the same. Globally they are cutting rates cos there is not enuf liquidity...
Although they are not directly, directly related, it does eventually have an affect on the interest rates.. Im actually impressed with Tito and his crew, they are atleast trying to curb household debt via the nca etc. Donno if its owrking tho.. Just causing hassles.
And actually it did have an impact cos many analysts felt that the mpc should keep interest rates the same. Globally they are cutting rates cos there is not enuf liquidity...
Although they are not directly, directly related, it does eventually have an affect on the interest rates.. Im actually impressed with Tito and his crew, they are atleast trying to curb household debt via the nca etc. Donno if its owrking tho.. Just causing hassles.
No. The reserve bank's only mandate is to curb inflation. Inflation has been on the up but the sub prime issue only surfaced about 2 weeks ago, so it wouldn't have been prominent in the data used by the MPC.
Tito's only tool (in his opinion) to fight inflation is to raise interest rates. Inflation was fueled up until recently by high debt levels, the fuel price and of course substantial food price inflation over the last 18 months. As it is now, food price inflation is on the increase - despite a year consisting of six interest rate hikes. World share markets' impact on our markets is of little consequence - with the exception of the Rand exchange rates, of course. We are predominantly an importing country - we import a lot more than we produce. This is another concern for Tito.
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well can issue bonds and prevent financial instutions from lending (NCA).
Those are 2 other options but interest rate is easiest...
Agreed - but Tito believes it's his only option.
Might be a good time for these people to start considering leaving the country. Other countries have had essentially big interest rate increases, but they started at very low levels. I think rates in Europe have increased by 100% - from 2% to a massive 4%.
For my parents that would have been the difference between being able to keep paying and defaulting or cutting back on luxuries like food. We didn't own expensive cars or anything like that, they were just trying to support themselves and their children.
Over 20 years you pay about double, over 30 years it is about triple.
It is unfair to everyone in multiple ways. It's great to punish people just trying to support their children and get by.
The real problem that should worry everyone is the very strong possibility that these increases are going to have no effect on inflation and that the MPC will, blindly, just keep raising rates. It is starting to worry me.
They could have increased the fractional reserve requirement.
The world runs on credit.
Taking steps to increase capacity. If part of the problem is that South Africa is a nett importer, then find ways to build export capacity.
I also don't think it is reasonable to have a rigid inflation target. We're not operating in a vacuum.
Frankly I'm not convinced those making the decisions are taking into account the complexities of the situation.
If the goal is to reduce money in circulation, then they should be using measures that are better than simply taking the average person's money and throwing it into a fire.
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With South Africa even importing staple foods the decline in the exchange rate is only going to make the situation worse. Are they going to just raise the rates again?
How many would default if interest rates were left as is, but people were given other options to siphon money out of circulation? How many would default if they targeted the supply side of credit?
I'm plan to pass as much of the increased cost of servicing debt onto my customers.
Cage Rattler
Expert Member
"Global food prices are set - on margin - by the state of the North American grains market. There is nothing you can do - short of direct intervention in the market - to alter global food prices by domestic policy settings - except by allowing you currency to rise against the USD."
Noxibox i understand what youre saying but its been proven that interest rates are the best for curbing inflation (Or rather the easiest) ..
We cannot allow inflation to get out of hand. Look at whats happening with the strikes and food prices etc. Inflation is very very dangerous if it grows uncontrollably.
And i disagree when u say that interest rate increases have had no change.. It is impossible to gauge that. If Tito had left the interest rates as is from 3 years ago, im sure inflation would have increased quite a bit.. Im no economist but if he had done nothing for the last few years, i would guess inflation would have been higher than 10%... I stand to be corrected if what ive said is garbage....
And he needs to worry about the economy as a whole, not how average people meet bond repayments.. Your house repayment should not cost you more than 1/3 or 1/2 of the joint income for the house...If it does, then you have probably bought a house that is too expensive and are too deep in credit...
IMHO
edit: And i think what cage rattler has jst said makes sense too..
We cannot allow inflation to get out of hand. Look at whats happening with the strikes and food prices etc. Inflation is very very dangerous if it grows uncontrollably.
And i disagree when u say that interest rate increases have had no change.. It is impossible to gauge that. If Tito had left the interest rates as is from 3 years ago, im sure inflation would have increased quite a bit.. Im no economist but if he had done nothing for the last few years, i would guess inflation would have been higher than 10%... I stand to be corrected if what ive said is garbage....
And he needs to worry about the economy as a whole, not how average people meet bond repayments.. Your house repayment should not cost you more than 1/3 or 1/2 of the joint income for the house...If it does, then you have probably bought a house that is too expensive and are too deep in credit...
IMHO
edit: And i think what cage rattler has jst said makes sense too..
rendan: there's a few South African circumstances that make interest rate hikes much less effective that they would in other, more developed countries.
In this country we have a unique situation that a minority of the population funds the entire economy. The tax burden on this section of the population is already very high. Continuously raising interest rates (and indications are strong there will be two more this year, bringing the total to 8 in 16 months) impacts this section of the population hardest. The very poor will feel the effect of a rate hike much later, as it takes a while (up to a year!) for interest rate hikes to filter through the economy.
Another thing, the NCA (national credit act) is not a part of the Reserve Bank in anyway. The Reserve bank does not deal with the public directly - but only with commercial entities such as banks. The problem with smacking interest rates to try and curb inflation in this country is that it has never worked in the past, yet they keep trying. There was a time in this country where they actually pushed up the interest rate in an attempt to counter the falling rand
Tito says he has no other tool at his disposal, and he probably doesn't. However, the banks are so focussed on maximising profit that any costs increases handed to them are immediately passed on to the consumers. Now bear in mind that around 20% of the country's population holds the bulk of all formal debt either.
South African's were forced to elevate their debt levels. The rise of prices in everything from houses to food to labour has resulted in escalating costs for businesses and consumers alike. However, despite the multiple rate hikes, debt has increased. This tells us two things:
1. The debt burden endured by South Africans is not necessarily overextending them
2. The majority of South Africans who are in debt are smart enough to ensure that they manage their debt well enough.
So, increasing the rates over the past year has, in my learned opinion, not actually achieved what it was meant to achieve. Inflation has steadily increased, and the latest data shows that sharp increases in the cost of food and labour are largely going to ensure that it wouldn't work this time round.
In this country we have a unique situation that a minority of the population funds the entire economy. The tax burden on this section of the population is already very high. Continuously raising interest rates (and indications are strong there will be two more this year, bringing the total to 8 in 16 months) impacts this section of the population hardest. The very poor will feel the effect of a rate hike much later, as it takes a while (up to a year!) for interest rate hikes to filter through the economy.
Another thing, the NCA (national credit act) is not a part of the Reserve Bank in anyway. The Reserve bank does not deal with the public directly - but only with commercial entities such as banks. The problem with smacking interest rates to try and curb inflation in this country is that it has never worked in the past, yet they keep trying. There was a time in this country where they actually pushed up the interest rate in an attempt to counter the falling rand
Tito says he has no other tool at his disposal, and he probably doesn't. However, the banks are so focussed on maximising profit that any costs increases handed to them are immediately passed on to the consumers. Now bear in mind that around 20% of the country's population holds the bulk of all formal debt either. South African's were forced to elevate their debt levels. The rise of prices in everything from houses to food to labour has resulted in escalating costs for businesses and consumers alike. However, despite the multiple rate hikes, debt has increased. This tells us two things:
1. The debt burden endured by South Africans is not necessarily overextending them
2. The majority of South Africans who are in debt are smart enough to ensure that they manage their debt well enough.
So, increasing the rates over the past year has, in my learned opinion, not actually achieved what it was meant to achieve. Inflation has steadily increased, and the latest data shows that sharp increases in the cost of food and labour are largely going to ensure that it wouldn't work this time round.
rendan: there's a few South African circumstances that make interest rate hikes much less effective that they would in other, more developed countries.
In this country we have a unique situation that a minority of the population funds the entire economy. The tax burden on this section of the population is already very high. Continuously raising interest rates (and indications are strong there will be two more this year, bringing the total to 8 in 16 months) impacts this section of the population hardest. The very poor will feel the effect of a rate hike much later, as it takes a while (up to a year!) for interest rate hikes to filter through the economy.
Another thing, the NCA (national credit act) is not a part of the Reserve Bank in anyway. The Reserve bank does not deal with the public directly - but only with commercial entities such as banks. The problem with smacking interest rates to try and curb inflation in this country is that it has never worked in the past, yet they keep trying. There was a time in this country where they actually pushed up the interest rate in an attempt to counter the falling rand
South African's were forced to elevate their debt levels. The rise of prices in everything from houses to food to labour has resulted in escalating costs for businesses and consumers alike. However, despite the multiple rate hikes, debt has increased. This tells us two things:
1. The debt burden endured by South Africans is not necessarily overextending them
2. The majority of South Africans who are in debt are smart enough to ensure that they manage their debt well enough.
So, increasing the rates over the past year has, in my learned opinion, not actually achieved what it was meant to achieve. Inflation has steadily increased, and the latest data shows that sharp increases in the cost of food and labour are largely going to ensure that it wouldn't work this time round.
Read here...
SARB ups rates... & credibility
http://www.fin24.co.za/articles/default/display_article.aspx?ArticleId=1518-25_2166075
And the statement you make that most people in debt know how to manage their finances is not true... it cant be, because it is currently a big problem and it wouldn't be a big problem if people knew how to manage their finances....