You are currently viewing Rising rates and fuel costs

Rising rates and fuel costs

South African household finances showed unexpected resilience in Q2 2026, but independent economist John Loos warns of a severe downturn in the second half of the year. Stronger investment income and a dip in savings temporarily offset an interest rate hike and global oil shocks, but lagged economic pressures are catching up with consumers.
 
Q2 2026 Performance (The Upside)
  • Resilient Spending: Real household consumption grew by 0.4% quarter-on-quarter and 2.9% year-on-year, despite a 0.2% decline in overall GDP.
  • Income Beating Inflation: Disposable income growth jumped to 7.8% year-on-year (up from 4.6% in Q1), pushing real disposable income growth up to 2.97%. This was likely driven by 2025 investment lags rather than wages.
  • Improved Debt Ratios: The household debt-to-disposable income ratio dropped to 61.3 (its lowest since 2019). The debt-service ratio also edged down slightly from 9.5 to 9.4.
  • The Cost: Consumers dipped further into financial buffers, sending the net household savings rate down from -1.3% to -1.6%.
 
H2 2026 Outlook (The Risks)
  • Lagged Shock Effects: The full impact of the May 2025-basis-point repo rate hike, a subsequent late-September rate hike, and unresolved US-Iran conflict oil pressures will begin to strain finances.
  • Cost of Living Spike: Massive fuel hikes anticipated for October (over R3/litre for petrol and diesel) threaten to push inflation back above 5%, increasing the likelihood of further interest rate hikes.
  • Economic Slowdown: Leading indicators point downward, which will likely suppress employment, wage growth, and investment income.
 
Impact on the Mortgage Market
  • Slowing Loan Growth: Growth in new residential mortgages has already dropped from a peak of 18.2% down to 9.54% year-on-year, with the prime rate hitting 10.75%.
  • Rising Arrears: As disposable income growth stalls and debt-service ratios climb, home loan repayment defaults and mortgage arrears are expected to rise moderately.

Read the article in property professional:

https://propertyprofessional.co.za/2026/10/05/rising-rates-and-fuel-costs-set-to-test-household-finances-with-mortgage-arrears-in-view/