SA sees 5% uptick in credit demand, yet mortgage and fixed asset lending stay subdued
Commenting on the Private Sector Credit Extension (PCSE), Frederick Mitchell, an economist at Aluma Capital, said that since the interest rate cuts began in September 2024, overall credit growth has accelerated, with most subcategories showing increases during June.
Credit demand increased by 5.0%, aligning with market expectations for the month, in June this year.
However, he said mortgage advances and credit for fixed asset purchases remain restrained, despite the ongoing interest rate cuts initiated in September last year.
'Demand for property continues to be sluggish in South Africa, indicating low capital expenditure by households and businesses. High consumer debt levels, stagnant wages, and increasing living costs still constrain recovery in this sector.
"Nevertheless, the full benefits of lower interest rates are anticipated to materialise later in 2025, as household disposable incomes improve, driven by positive market sentiment and potential additional rate cuts by the South African Reserve Bank (SARB),' Mitchell said.
Aluma said that in June, instalment credit sales grew by 0.8% month-on-month, following a 0.9% increase in May, with an annual growth rate of 6.5%.
The financial institution said that over the past two years, consumers have relied more on short-term credit to cope with rising living expenses, shown by a 7.1% increase in other loans and advances, up from 7.0% in May.
Mitchell said with inflation remaining favourable, continued rate reductions are expected to further enhance disposable incomes, promoting increased demand for goods and fixed assets in the second quarter of this year and beyond.
The latest inflation numbers for June continue to support the possibility of a further interest rate cut by the Reserve Bank this week, says Herschel Jawitz, CEO at Jawitz Properties.
He said while upside risks remain, fuel prices are projected to fall marginally in August, and inflation is still sitting at the lower end of the target range.
'The residential property market has started to benefit from the cumulative one percent drop in interest rates since last year, with overall buyer demand improving across all price levels, including among first-time buyers.
"With the increase in demand, we are starting to see the first signs of a rebalancing between supply and demand, which in the medium to long term is positive for property prices. In addition, a further rate would help to improve consumer confidence, which bounced back from a three-year low of - 20 to a less pessimistic - 10," Jawitz said.
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IOL News
30-07-2025
- IOL News
SA sees 5% uptick in credit demand, yet mortgage and fixed asset lending stay subdued
Turning home improvement dreams into reality often comes with an exorbitant price tag, and the necessary funds are not always readily available. Commenting on the Private Sector Credit Extension (PCSE), Frederick Mitchell, an economist at Aluma Capital, said that since the interest rate cuts began in September 2024, overall credit growth has accelerated, with most subcategories showing increases during June. Credit demand increased by 5.0%, aligning with market expectations for the month, in June this year. However, he said mortgage advances and credit for fixed asset purchases remain restrained, despite the ongoing interest rate cuts initiated in September last year. 'Demand for property continues to be sluggish in South Africa, indicating low capital expenditure by households and businesses. High consumer debt levels, stagnant wages, and increasing living costs still constrain recovery in this sector. "Nevertheless, the full benefits of lower interest rates are anticipated to materialise later in 2025, as household disposable incomes improve, driven by positive market sentiment and potential additional rate cuts by the South African Reserve Bank (SARB),' Mitchell said. Aluma said that in June, instalment credit sales grew by 0.8% month-on-month, following a 0.9% increase in May, with an annual growth rate of 6.5%. The financial institution said that over the past two years, consumers have relied more on short-term credit to cope with rising living expenses, shown by a 7.1% increase in other loans and advances, up from 7.0% in May. Mitchell said with inflation remaining favourable, continued rate reductions are expected to further enhance disposable incomes, promoting increased demand for goods and fixed assets in the second quarter of this year and beyond. The latest inflation numbers for June continue to support the possibility of a further interest rate cut by the Reserve Bank this week, says Herschel Jawitz, CEO at Jawitz Properties. He said while upside risks remain, fuel prices are projected to fall marginally in August, and inflation is still sitting at the lower end of the target range. 'The residential property market has started to benefit from the cumulative one percent drop in interest rates since last year, with overall buyer demand improving across all price levels, including among first-time buyers. "With the increase in demand, we are starting to see the first signs of a rebalancing between supply and demand, which in the medium to long term is positive for property prices. In addition, a further rate would help to improve consumer confidence, which bounced back from a three-year low of - 20 to a less pessimistic - 10," Jawitz said.
IOL News
23-07-2025
- IOL News
Economist cautions against interest rate hikes amid economic uncertainty
South African Reserve Bank (SARB) governor Lesetja Kganyago has strongly advocated for the country to lower its inflation target from 4.5% to 3%. Image: Thobile Mathonsi / Independent Newspapers South African Reserve Bank (SARB) governor Lesetja Kganyago has strongly advocated for the country to lower its inflation target from 4.5% to 3%. Experts argue that a lower inflation target would improve price stability, reduce borrowing costs and enhance investor confidence in the long term. However, many feel it would entail some short term 'pain' for the sake of long-term gain. Yet tightening monetary policy could be a dangerous move in the current economic climate, warns Frederick Mitchell, chief economist at Aluma Capital. The US says it intends to impose a 30% tariff on South African goods, with threats of a further 10% tariff targeting BRICS countries. This could plunge many industries into crisis. Industries that rely on exports, such as vehicles, citrus and mineral commodities, are particularly vulnerable. These sectors are already under stress and additional tariffs could hinder economic growth and exacerbate the country's already high unemployment rate of over 30%. Within this context, the SARB faces a constrained path, Mitchell said. 'Conventional wisdom suggests that raising interest rates can curb inflation, yet in the current environment, where inflation remains subdued but economic growth is threatened, tightening monetary policy may exact an economic toll without addressing the underlying trade issues,' Mitchell explained. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. 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Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ As SARB Governor Lesetja Kganyago has noted, inflation is expected to remain within the target range, but global trade war uncertainties loom large. Higher tariffs and potential retaliatory measures could put a damper on South Africa's economic recovery. 'Increasing interest rates in such a fragile environment risks stifling growth further, especially as global economic slowdown cues stemming from China's potential slowdown and trade tensions compound the problem,' he added. 'Given that South Africa's economy is highly reliant on exports and sensitive to external shocks, the restrictive monetary stance could deepen recessionary pressures without equipping the economy to withstand the imminent trade disruptions.' Although the government's fiscal space remains limited, an over-reliance on monetary policy to counteract trade barriers would neither be prudent nor effective. Mitchell believes the focus should remain on defending economic stability through fiscal prudence and resistance to over-tightening monetary policy in relation to inflation. Furthermore, policymakers should prioritise diplomatic engagement and trade negotiations. 'While efforts to curb inflation are vital, the scope for interest rate hikes in response to global trade tensions and tariffs is limited. Such measures risk further slowing economic growth, increasing unemployment, and undermining investor confidence,' Mitchell said. 'A prudent approach would involve safeguarding industry competitiveness and fostering diplomatic solutions, recognising that the health of South Africa's economy hinges on resilient trade relations and sound fiscal management rather than aggressive rate hikes amid uncertain international conditions.' Get your news on the go, click here to join the Cape Argus News WhatsApp channel. Cape Argus
IOL News
22-07-2025
- IOL News
Given where the economy is, interest rate hikes could do more harm than good
A tighter monetary policy amid the current global uncertainty could worsen South Africa's economic situation. Image: RON AI South African Reserve Bank (SARB) governor Lesetja Kganyago has strongly advocated for the country to lower its inflation target from 4.5% to 3%. Although interest rates are currently on a downward trajectory, albeit following a cautious approach, there are fears that a lower inflation target would lead to a tighter monetary stance, potentially bringing an end to the current cutting cycle and possibly even leading to more hikes in the short term if inflation edges upward amid the current global economic uncertainty caused by Donald Trump's trade war. Experts argue that a lower inflation target would improve price stability, reduce borrowing costs and enhance investor confidence in the long term. However, many feel it would entail some short term 'pain' for the sake of long-term gain. Yet tightening monetary policy could be a dangerous move in the current economic climate, warns Frederick Mitchell, chief economist at Aluma Capital. The US says it intends to impose a 30% tariff on South African goods, with threats of a further 10% tariff targeting BRICS countries. This could plunge many industries into crisis. Industries that rely on exports, such as vehicles, citrus and mineral commodities, are particularly vulnerable. These sectors are already under stress and additional tariffs could hinder economic growth and exacerbate the country's already high unemployment rate of over 30%. Within this context, the SARB faces a constrained path, Mitchell said. 'Conventional wisdom suggests that raising interest rates can curb inflation, yet in the current environment, where inflation remains subdued but economic growth is threatened, tightening monetary policy may exact an economic toll without addressing the underlying trade issues,' Mitchell explained. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ As SARB Governor Lesetja Kganyago has noted, inflation is expected to remain within the target range, but global trade war uncertainties loom large. Higher tariffs and potential retaliatory measures could put a damper on South Africa's economic recovery. 'Increasing interest rates in such a fragile environment risks stifling growth further, especially as global economic slowdown cues stemming from China's potential slowdown and trade tensions compound the problem,' he added. 'Given that South Africa's economy is highly reliant on exports and sensitive to external shocks, the restrictive monetary stance could deepen recessionary pressures without equipping the economy to withstand the imminent trade disruptions.' Although the government's fiscal space remains limited, an over-reliance on monetary policy to counteract trade barriers would neither be prudent nor effective. Mitchell believes the focus should remain on defending economic stability through fiscal prudence and resistance to over-tightening monetary policy in relation to inflation. Furthermore, policymakers should prioritise diplomatic engagement and trade negotiations. 'While efforts to curb inflation are vital, the scope for interest rate hikes in response to global trade tensions and tariffs is limited. Such measures risk further slowing economic growth, increasing unemployment, and undermining investor confidence,' Mitchell said. 'A prudent approach would involve safeguarding industry competitiveness and fostering diplomatic solutions, recognising that the health of South Africa's economy hinges on resilient trade relations and sound fiscal management rather than aggressive rate hikes amid uncertain international conditions.' IOL Business
