Consumers on all income levels are finding it harder and harder to keep up with their home loan payment as they struggle with their income not keeping up with their expenses. The significant decline in the number of people who can keep their home loans up to date clearly illustrates the level of financial distress consumers currently experience.
Historically around 92 of all home loan accounts were up to date, but it has been dropping dramatically in recent times. The latest available figure shows it is down to 88 in the last quarter of 2023. That means home loan accounts with arrears have increased by about 50 recently and it happened in the relatively short time span of 18 months up to December 2023.
Inflation has been quite stubborn globally and interest rates remain high as a result. In South Africa the repo rate of the South African Reserve Bank Sarb reached its highest level in 15 years, says Renier Kriek, managing director of Sentinel Homes. This means the prime rate, used to price home loans and other consumer debt like car loans and credit cards, is elevated.
High inflation and the high interest rate response was caused by a confluence of factors, including the hangover from previous quantitative easing, supply-chain bottlenecks during the Covid-19 pandemic, the Russia-Ukraine war and the recent conflict in the Middle East.
Despite earlier predictions that the high interest rate cycle could turn around in May this year it is now only expected next year due to high inflation proving stickier than anticipated.
