Households face a challenging environment

Rising interest rates to weigh on credit uptake
Loans extended to households rose by 2.1% year-on-year at the end of July 2022, compared to a growth rate of 2% in June 2022.
Phillepus Uusiku
Households face a challenging environment as expensive living costs combined with tighter monetary policy during 2022 add to budgetary pressures. Rising interest rates will likely weigh on demand for credit, more so for households than corporates, Simonis Storm said.

Inflation was recorded at 6.8% in July 2022, the highest rate recorded since July 2017, according to the Namibia Statistics Agency. The Bank of Namibia (BoN) increased the repo rate by 175 basis points (bps) thus far in 2022.

The cost at which commercial banks borrow from the central bank currently stands at 5.50%, while the prime lending rate stands at 9.25%.

“We expect another 100bps hike in the repo rate before the end of 2022, which would lift the prime rate from 9.25% to 10.25%,” Simonis Storm said.

According to the Bank of Namibia money and banking statistics, loans extended to households rose by 2.1% year-on-year at the end of July 2022, compared to a growth rate of 2.0% reported at the end of the preceding month.

The uptick was predominantly reflected by a rising demand in mortgage credit and other loans and advances, BoN said.

As for corporates, growth in credit rose to 6.5% at the end of July 2022, relative to a growth rate of 5.3% in June 2022. The increase reflects a rise in demand for mortgage credit as well as other loans and advances specifically by corporates in the mining, health and services sector, BoN added.

Overall, growth in credit uptake by the private sector increased stood at 4% at the end of July 2022 compared to the 3.4% at the end of June 2022.-phillep@nmh.com.na