By Emma Kakololo
WINDHOEK
The latest increase in interest rates is having a dramatic impact on consumer confidence, which has collapsed to its lowest level.
The country’s “big four” banks have already announced changes to lending rates after Friday’s increase in official rates.
Nedbank, First National Bank, Bank Windhoek and Standard Bank have put up a 50 basis point increase in interest rates from 14.75 percent to 15.25 percent, which is applicable to the prime overdraft rate, asset based finance (including vehicle financing) and the mortgage rate pertaining to home loans.
The increase follows the Bank of Namibia (BoN)’s monetary policy meeting last week on Wednesday, where it considered the current inflation trends, as well as domestic and international developments. This makes it the third increase this year.
Rising inflation expectations, evidence of mounting price pressures at retailers and high oil and agricultural prices were among the reasons cited for raising rates.
The increase in interest rates poses risk to consumer debt service capacity. The rates might hurt housing affordability, thereby curbing demand for new homes and home price appreciation.
A higher debt service burden could also translate into more financially distressed households. For instance, the estimated share of households filing for bankruptcy has drastically increased over the past two years.
“These increases would make it even tougher for those who have been struggling to keep up with their mortgage and car repayments, due to the previous increase,” said a very disappointed house owner, Lukas Shanyengange, yesterday.
“Some people might even be thinking of ‘hanging’ themselves for not being able to pay off their debt.”
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