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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
March 3, 2025

Private Sector Credit Extension (PSCE)

January 2025

In January 2025, credit demand rose by 4.6%, exceeding expectations, although overall demand is still modest. Interest rate cuts are expected to enhance property and asset purchases as disposable incomes improve. As consumers increasingly rely on credit, overall demand for goods and fixed assets is poised to rise throughout 2025

In January 2025, demand for credit increased by 4.6%, up from 3.8% in December 2024 and surpassing market expectations of 3.0%. Although growth occurred across most subcategories, overall credit demand remains relatively low, despite recent interest rate cuts in November and January.

Mortgage advances and credit for fixed asset purchases are particularly sensitive to interest rates. The 25-basis point reductions implemented in both November 2024 and January 2025 have not yet significantly boosted property demand. Cumulatively, interest rates have been reduced by 150 basis points since September 2024, and the benefits of these lower rates are expected to become more evident later in 2025 as households and businesses show signs of recovery in disposable income.

In January, instalment credit sales rose slightly by 0.5%, following a 0.2% increase in December, with an annual growth of 5.9% for January 2025. Over the past two years, consumers have increasingly utilised short-term credit to manage financial pressures and rising living costs, reflected in a 4.4% increase in loans and advances in January 2025, following a 4.5% rise in December.

The growth in property and fixed asset purchases remains modest, with mortgage advances rising only 3.2% in January 2024. The slowdown in mortgage growth rates in late 2023 has been influenced by rising interest rates in the property sector. However, the recent 50-basis point rate cut in January may stimulate demand for properties and fixed assets as household income stabilises and increases in the coming months. As lower interest rates enhance consumers’ disposable income, overall demand for goods and fixed assets is likely to rise as we progress further into 2025.

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