Private Sector Credit Extension (PSCE)

In 2024, credit extended by financial institutions in South Africa increased by 4.0% for the year, with demand for credit growing by 3.8% in December, following a 4.2% rise in November. Despite this growth across most sub-categories, overall credit demand remains low, even after the interest rate reduction in November.

Mortgage advances and credit for fixed asset purchases are sensitive to interest rates, and the 25-basis point cut in November has not yet significantly affected property demand. The overall interest rate reduction of 50 basis points for 2024 may take time to impact the market, with benefits likely to become apparent later in 2025 as disposable income for households and businesses improves.

In December, instalment credit sales rose by just 0.2%, following a 0.7% increase in November, with an annual increase of 6.1% for December 2024. Over the past two years, consumers have increasingly relied on short-term credit to navigate financial pressures and rising living costs, evidenced by a 4.5% increase in loans and advances in December after a 4.6% rise in November.

Growth in property and fixed asset purchases remains modest, with mortgage advances increasing by only 3.2% in December 2024. The slowdown in mortgage growth rates in late 2023 is largely due to the impact of rising interest rates on the property sector. However, the recent 50-basis point interest rate cut and the potential for another 25-basis point reduction in January 2025 may enhance demand for properties and fixed assets in the coming months. As lower interest rates improve disposable income for consumers, overall demand for goods and fixed assets could also rise as we move into 2025.