Prepare for Covid credit bubble about to burst
The Covid credit bubble is about to burst, despite consumers still being over-indebted and many are still unable to earn a consistent income. South Africans' dependency on credit in a pandemic-fuelled world could be our downfall if we fail to get it under control.
This stern warning comes from Momentum financial adviser Janine Horn, who says after the Budget Speech, South Africans are already preparing for a broad range of price increases as taxes, inflation, interest rates and rising food prices will start to increase the cost of living to unmanageable heights.
As prices increase, so does inflation. As it gets harder to maintain a lifestyle, consumers dip into their credit cards, but this only exacerbates the problem, as one of the methods to curb inflation is to make credit more expensive. “This meant that credit was relatively cheap and considering the fluctuating levels of income consumers experienced, credit was the only way forward.”
Horn says consumers are now feeling so financially exposed, insecure and vulnerable that any small market change, such as interest rate hikes, will impact the state of personal finances in this country in a negative way.
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