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February 2016
Housing
A
ccording to TransUnion Credit
Bureau, Consumer Credit Index
(CCI), the index is based on a
100-point scale, where 50.0 is the
break-even level between improve-
ment and deterioration of credit
health. A number greater than the
50.0 break-even point shows an
improvement in credit health. The
index comprises of consumer credit
borrowing and repayment behaviour,
household cash flowand debt servic-
ing costs.
“Despitewarnings ofworsen-
ingmacroeconomic conditions,
consumer behaviour does not
show signs of falling credit
health. This is partly the result
of an already heavily indebted
household sector choosing to
be more cautious, and partly
the result ofmore prudent lend-
ing standards in thewake of the
unsecured lending boom,” said
GeoffMiller, Regional President
of TransUnion Africa.
Miller also cautioned against
complacence. “Macroeconomic
conditions can take some time
to reflect fully in consumer be-
haviour. A weaker rand exchange
rate raises the cost of livingwhile also
compelling the central bank to raise
interest rates.”
Household cash flow remained
roughly steady in the fourth quarter,
but, according toMiller, higher prices
on imported goods due to randweak-
ness is a threat that could plausibly
cause the cash flow indicator to turn
negative in the first half of 2016.
“Since the rapid randweakness inDe-
cember 2015, we’re strongly focused
on the rand as a potentially big risk
factor in 2016”, he added. Household
debt service costs increased during
the fourth quarter due to slightly
higher household indebtedness and
higher interest rates.
The Reserve Bank raised the
benchmark repo rate from 6% to
6.25% in November 2015. But many
analysts expect the pace of rate hikes
to accelerate in light of a dramatic
devaluation in the rand exchange rate
which began in December.
Russell Lamberti, Chief Strate-
gist of ETM Analytics, the firm that
constructed the CCI in collaboration
with TransUnion, noted that currency
instability was one of the key factors
in the interest rate outlook. “The
Reserve Bank hiked interest rates
by 50 basis points in January 2016,
and more such moves may
be in store if the currency
does not stabilise soon and
begin recovering. Interest
rate hikes will cause many
of the most financially
vulnerable borrowers to
default. The key for man-
aging this process will be
for credit providers to fo-
cus on loan quality and
for borrowers to be more
prudent than usual.”
Facts and Figure
In the fourth quarter of
2015 the CCI shows:
• 56,4millionconsumeraccountswere
measured
• 0,95 million of accounts were in ar-
rears formore than threemonths
• 3,4 million accounts were in arrears
for 30 days
• R137,7billionvalueofrevolvingcredit
measured
• Prime overdraft rate in the last quar-
ter of 2015was 9.75%
■
Consumer indebtedness
Consumer credit behaviour remained stable in the fourth quarter of
2015 and neither materially worsened nor improved from the third
quarter. Encouragingly, the number of new defaults declined by 5,1%
compared to the previous year.