The fuel price increase could lead to higher risk of home loan defaults as homeowners with tight budgets may struggle to keep up with bond repayments, leading to an increase in arrears and possible repossessions. Photographer - Tracey Adams- African News Agency(ANA)
The rise in fuel prices means there is less disposable income to cover bond repayments, utilities, and maintenance costs, according to short-term lender Wonga.
The loan firm’s chief marketing officer James Williams said for aspiring homeowners, the rising cost of living could impact affordability assessments, making it harder to qualify for home loans.
“Banks and lenders consider disposable income when approving loans, and higher expenses may reduce the amount people can borrow,” Williams said.
This past week, the price of diesel increased by R1.01/litre, while both 93 and 95 octane petroleum prices are lifted by R0.82/litre.
FNB said this means that the average logistics vehicle with an 80-litre diesel tank will cost around R81 more to fill up, while full 93 and 95 octane petrol tanks will cost an additional R76. Similarly, the average private vehicle with a 45-litre diesel tank will cost around R45 more to fill up, while filling 93 and 95 octane petrol tanks will cost an additional R37.
The rise in fuel prices will add to the overall cost of living in South Africa, making it even more challenging for motorists, homeowners, and those looking to buy property. Higher fuel costs lead to increased transportation expenses, can influence higher prices for goods and services, and additional inflationary pressure on household budgets.
National Debt Counsellors’ Association (NDCA) chairperson Benay Sager said fuel increases are very much driven by the exchange rate, as well as by the international price of crude oil, so it’s a bit difficult to monitor and manage it for consumers. “We are mostly takers and not makers when it comes to price, and we don’t really have the ability to substitute petrol with anything else,” Sager said.
Seeff Property Group chairman Samuel Seeff said while South Africa has no control over the factors which impact fuel costs, the effect of rising transport costs directly impacts household budgets and the disposable income available for home loans and costs associated with purchasing property.
He said a counter to that would be to ease the burden on consumers with lower interest rates, and a growing economy which will create more jobs and provide higher salary and wage increases.
“The most important priority for South Africa must be economic growth and job creation.” Seeff says policies and decisions need to be focused on economic growth and job creation, including cutting corruption and wastage, and the reforms necessary for economic growth and job creation.
The estate agency said their call to the South African Reserve Bank ahead of the next MPC meeting was for it to implement more robust interest rate cuts needed to support economic growth rather than remaining overly concerned with inflation given the risks posed to the country of continued low growth and job losses.
On the other hand the NDCA said for property owners, the impact of the fuel price increase will probably be minimal-but means more money has to be spent on things that one could spend on other disposable income items. “Particularly for homeowners, fuel price increases often impact other input expenses in the long term, such as maintenance and all the things that have to be taken care of on a house.”
Sager said there is no direct impact in terms of bond repayments. “Those have been going down, and thankfully interest rates decreased in the last three cycles, so I think the overall impact on consumers will be minor. The impact on property owners will also be minor, but the bigger factor that impacts property owners is the interest rates. As mentioned, these have thankfully gone down, and we expect them to continue to do so for at least one more cycle at the end of March.”
Wonga said however the rising fuel prices can contribute to a higher cost of living, which in turn could lead to increased household debt. It said as disposable income shrinks, more people may rely on credit cards, personal loans, and overdrafts to cover basic expenses, increasing their overall debt burden.
The micro-lender said this could lead to higher risk of home loan defaults as homeowners with tight budgets may struggle to keep up with bond repayments, leading to an increase in arrears and possible repossessions.
Williams said if more households become financially constrained, demand for new home loans could slow down, impacting property prices and overall market activity.
He added that if affordability pressures mount, lenders may tighten lending criteria, making it even more challenging for first-time buyers to enter the property market.
Wonga said there are several strategies that homeowners and buyers can consider to stay financially stable despite rising costs.
1. Cut back on discretionary spending (e.g., dining out, entertainment) to free up money for essential expenses like bond repayments.
2. Reduce reliance on petrol and diesel by using public transport, carpooling, or working remotely where possible to help manage costs.
3. Find a side hustle: “Pursuing side businesses or renting out extra space in homes can provide additional financial relief.”
Overall, Wonga said the combination of high fuel prices, sustained interest rates, and rising living costs means homeowners must be proactive in managing their finances to avoid falling into excessive debt.
PROPERTY