Debt Relief on the Cards for 2025
We’ve seen an increase in debt among South Africans over the past few years, especially during Covid. And with the massive interest hikes on debt, things have gone south for many residents in the past couple of years.
There’s some good news and growing relief on the way for struggling South Africans who have been facing mountains of debt.
The Main Aggressors of Debt
South African households are struggling to keep their heads above water, with the cost of living drastically increasing along with interest rates. So, what are the biggest stressors impacting local debt?
It appears that there are multiple aggressors that directly impact the financial status of South Africans, keeping them in debt.
Read: Are Loans for Debt Review Clients Legal?
This includes secured debt like home loans and car loans, as well as unsecured debt like personal loans and credit card debt. Credit cards are among the biggest culprits, offering revolving debt where you can repeatedly borrow funds against a certain limit.
Other factors that have impacted this are the rising cost of living, not to mention electricity, fuel, and other household expenses, which are also putting a massive dent in monthly income. This makes it impossible for many South Africans to make ends meet, and they cut back even on essentials as they try to keep afloat. Some take out more debt.
The reality is that over 50% of South Africans are credit-active and currently over-indebted. Repaying debt or even meeting debt obligations is becoming a massive struggle.
Read: Payday Loans 101 – Everything You Need To Know
According to the statistics, many South Africans spend over half of their monthly income on paying off debt.
It’s a big concern that some municipalities, like Cape Town and Johannesburg, have rehabilitation plans in place to assist residents with managing their debts. These programs offer a partial debt write-off and other forms of financial relief.
Debt Relief is Coming
While many have felt that there is no light at the end of the tunnel, SARB expects to reduce interest rates significantly as inflation data improves.
According to Bloomberg’s Africa Economist Yvonne Mhango, the inflation data is better than expected and can trigger the start of a rate-cutting cycle as early as September 2024.
The data from Stats SA from August 2024 shows that inflation dropped from 5.1% in June to 4.6% in July, which is 0.3% lower than the expected 4.9%.
Read: 2025 is Looking Good for Debt as SA Dodges Another Recession
Just before this, economists and financial institutions like the Bank of America, Standard Bank, Nedbank and the Bureau for Economic Research predicted a potential repo rate cut.
Interest rates are expected to be cut by at least 25 basis points (bps) in September, which means some immediate relief for South Africans currently repaying mortgages and car loans. On average, that would mean monthly savings of around R301.
It Doesn’t End There
Originally believed to take place in November, a further 25bps rate cut was announced near the end of September, continuing to provide financial relief.
The US Federal Reserve will make further cuts in early 2025. Overall, the Fed could potentially lower its funds rate by 175 bps, adding an additional 50 bps later in the year.
In total, we could see a total rate reduction of 2.0% by the end of 2025, which would bring plenty of relief to South African consumers from the end of 2024 to the end of 2025.
Read: Experts Warning – Don’t Ignore Interest Rates in 2024
If the forecasts are correct, South Africans can look forward to a cumulative rate cut of 150 bps, which means paying around R1,800 less per month on your total home and car repayments. This could be significant savings and make it quicker to get out of debt.
The current financial strain has been quite severe and felt by all South Africans, with some feeling it more than others. It has also been an eye-opener in terms of what is essential and what luxuries we’ve made out to be essential.
Nothing is set in stone, and we can only wait to see if the rates go down and by how much bps it will go down. Stay up to date with the latest rate cuts and other news on finances with Debtline.
Get Ahead with Debtline
Debt-ridden households can expect some relief as the interest rates start falling in the next few months. If you want to get a head start on killing off your debt, then fill in the contact form to receive a free callback.
Debtline provides you with a tailor-made debt solution that converts your debt repayments to a single, monthly payment. There are many benefits to using Debtline, including access to NCR-registered debt counsellors, advice, and assistance with debt repayments. You can also enjoy protection while being under Debt Review.
