Card debt growth slumps
Flow slows to a trickle
NOWHERE IS consumers’ unwillingness to splurge out money they don’t have as clear as from the figures on growth in credit card debt. The rate of growth has slumped to just 4,25% from levels well above 35% in 2007 and reaching 50% in 2006. Before interest rates began rising in June 2006, banks were handing out credit cards like candy to American kids on Halloween. Similarly, other credit taps were wide open and flowing, helping to underpin a housing boom.
The current picture is radically different. Mortgage credit growth is now growing at only 13,2%, well down from a 30,9% peak in October 2006. Overall, private sector credit declined by 0,6% month-on-month in December 2008, or a substantial R11,3bn. Stanlib economist Kevin Lings says it’s the first monthly decline in total private sector credit since May 2004.
Some economists point out that banks’ unwillingness to provide credit without borrowers putting down a deposit first is having an effect on the credit growth numbers, intensifying the effects of still high interest rates. The SA Reserve Bank started cutting the interest rate in December by 50 basis points and at the time of writing last week the rate was expected to be cut again.