Research

Continued low growth in household credit and mortgage balances

Growth in outstanding credit balances in the South African household sector came to 2,4% year-on-year (y/y) at the end of May 2016, with growth in some components of total credit balances distorted as a result of data changes.

The value of household credit balances amounted to R1 467,2 billion and end-May. Growth in household mortgage balances was unchanged at 4,3% y/y at end-May from April, with outstanding balances amounting to R878,4 billion (70% of total mortgage balances and 28% of total private sector credit balances) at the end of May.

The South African economy is facing a state of stagflation, with growth in real gross domestic product forecast at a negligible 0,1% in 2016 and the headline consumer price inflation rate expected to rise to above 7% by December, averaging 6,7% for the full year.

Interest rates are set to rise somewhat further, with banks’ prime lending and variable mortgage interest rates projected at 10,75% per annum by year-end and 11% per annum by early next year. Based on this macroeconomic outlook, the household sector is to experience increased financial pressure over the next 6-12 months, with these factors to lead to continued subdued growth in household credit extension.

Read more here: ABSA credit and mortgage advances (May 2016)