30-07-2025
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.
