Steady interest rates a boon for consumers

The SA Reserve Bank’s Monetary Policy Committee (MPC) has decided to leave interest rates unchanged at its fourth meeting for 2011.

The MPC left the repo rate unchanged at 5.5%. As a result, Absa will keep the prime interest rate at 9%.

Gavin Opperman, Chief Executive of Absa Retail Bank, notes that with inflation creeping up, low interest rates will benefit debt repayments by consumers.

In addition, the ratio of household debt to disposable income dropped to 75,9% in the second quarter of 2011 from 76,8% in the first quarter. The lower debt ratio and low interest rates have also resulted in the cost of servicing household debt dropping markedly over the past 2½ years.

Opperman cautions that although consumer confidence will be buoyed by today’s MPC decision to keep rates steady, the number of consumers with impaired credit records still remains high.

“Consumers should not drop their guard. They have to live and spend within their means as inflation is rising, thereby impacting their purchasing power,” says Opperman.

“Unaltered interest rates will give support to the market, homeowners and prospective home buyers. Steady interest rates will also benefit the affordability of housing and mortgage finance.”

He also says that there is a general improvement in delinquencies in the early cycles.

“The volume of customers entering debt counselling has declined significantly over the past year and has been stable over the last quarter,” says Opperman.

Absa implemented campaigns to proactively target defaulting customers and offer assistance. The campaigns include targeted SMSes, physical visits or telephonic engagements to assist customers restructure their debt.

In addition to the above initiatives, Absa also has the Debt Solutions Helpline to assist customers in financial distress. The Helpline is operated by Debt Solution Specialists who conduct an analysis of a customer’s financial circumstances and then offer a tailor-made solution to help ease their debt. The contact number of the Debt Solution Helpline is: 0861 227 353 (between 08:00 – 16:30 on weekdays, Monday to Friday).