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Repo rate hike puts pressure on debtors

Mon, 25 August 2014 19:05
by Honorine Kaze


Recent interest rate hikes by the central bank have opened a can of worms and will make life difficult for loan servicers as commercial banks followed suit last week.
Bank of Namibia increased the repo rate by 0.25 basis points resulting in Bank Windhoek and Standard bank responding abruptly by hiking their interest rates.
Standard Bank Namibia has already effected of 0.25% increase on  both prime lending and home base rate.
“The new prime lending rate will go up from 9.50 to 9.75%. The home loan base rate will increase from 10.5%to 10.75%. The vehicle and asset finance rates will continue to be linked to the prime lending rate and will be priced accordingly,” SBN said in statement.
Bank Windhoek also announced an  increase in their Prime lending rate by 0.25 from  9.5% to 9.75% and their mortgage lending rate from 10.5% to 10.75%.
Analysts had earlier in this year predicted that around August, the likelihood of  repo rate should  be starting a gradual hike in  repo rate.
In the latest Monetary Policy, BoN Governor Ipumbu Shiimi insisted that the private sector I had increased strongly to an average growth rate of 15.3% during the first half of 2014 from 13.9% registered during the last six month of 2013. “This strong demand for credit came from both households and business sectors. The growth in household credit was mainly dominated by instalment credit, overdrafts and other loans and advances, which regrettably are also used to finance unproductive imported luxury goods.”
The Bank has overly expressed concern over the importation of unproductive goods mainly passenger vehicle and other luxury goods, which continue to exert pressure on the international reserves of the country.  Furthermore, during the first half of 2014, the trade deficit have widened further as a result of higher import bill.
The latest Simonis Storm Securities vehicle sales also stated that the June monthly vehicle sales increased to 1884 units with a 14.1% increase month on month as a result of a sharp increase in light commercial vehicles.
SSS economist Daniel Kavishe noted that light commercial vehicles were the highest during the month under review recording 945 units sold. Passenger vehicle sales followed suit with sales recorded at 828 units.  The main vehicle makes that outperformed were Toyota and Volkswagen with recorded sales of 643 and 286 units respectively.
Vehicle sales during the intervening month amounted to trade worth N$593m mainly supported by sales of Toyota Hilux which amounted to more than N$ 120m
The Central Bank repo rate hike has come after various other countries of the Southern region had started their repo rate.  At this point, Namibia’s recent Repo rate hike to 6% has thus outpaced the South African repo rate which is pegged at 5.75% after it recorded its first repo rate hike in January then June.
 The repo rate for Bostwana is however has remained pegged at 7.5%, which the Bank of Bostwana deem consistent with maintaining the inflation within the 3%to 6% objectives of the medium terms.