The latest Monetary Policy Committee (MPC) announcement by Governor Gill Marcus saw the repo rate increase from 5% to 5.5%.
Rates have remained flat for just over 18 months and the last MPC announcement, which saw an increase in the repo rate, was more than five and a half years ago. This is quite a momentous occasion for those savers who waited in anticipation for a higher return on their cash investments.
“This increase, however, brings with it an increase in the cost of servicing debt, which means that many South Africans will have less disposable income than before,” says Lezanne Human, CEO of FNB Savings and Investments.
Although savers will be excited about the increased return on their cash investments, the higher cost of servicing debt may result in consumers cutting back on their savings.
“Unfortunately, saving for goals, such as your child’s school fees and your retirement, can’t be delayed. Consumers should adjust their budget accordingly (however painful that may be in the short term) to ensure that they continue to save for these life events that will inevitably happen.”
“The good news is that – while making sacrifices by saving for these goals – consumers are simultaneously benefiting from higher returns on their cash investments,” concludes Human.