Middle and upper-class South Africans continue to rely heavily on credit cards to cover monthly expenses, with many struggling to repay their debt.
Experian’s latest Consumer Default Index (CDI) for Q1 2024 remained relatively stable across all consumer segments from December 2023 to March 2024.
This index measures the default behaviour of South African consumers with home loans, vehicle loans, personal loans, credit cards, and retail loan accounts.
Year-on-year, the composite Consumer Default Index (CDI) deteriorated from 4.56 to 4.69, reflecting a relative deterioration of 3%. This is notably less severe than the 18% and 32% relative deterioration observed in Q4 and Q3 of 2023, respectively.
The slowdown in deterioration indicates that while consumers still face significant challenges in meeting their debt obligations, the rate of decline has slowed compared to 2023.
From a product perspective, home loans saw the most significant relative deterioration at 21%, although this is an improvement from the 60% deterioration observed in Q4 2023.
Given that home loans constitute the largest share of the total market exposure, their decline was the primary driver of the overall deterioration in the composite CDI.
Credit cards experienced the second-most significant deterioration, with the CDI increasing from 7.28 to 7.63 year-on-year, a deterioration of 5%.
This suggests that mid-to-high affluence consumers, who typically qualify for high-end credit products, are continuing to struggle with debt repayment and are heavily relying on their credit cards to manage expenses.
CPI still remains below the 6% threshold in 2024 Q1, but at 5.3%, it continues to cause household expenditure to edge ever higher, putting more pressure on consumers from a cost-of-living perspective.
Food costs, although on an increasing trend, have seen a slower rate of increase over the last 6 months.
Market appetite for credit increased in Q4 (NCR data) to the highest volume on record, but approval rates still remain very low at just over 30%.
Despite Consumer Price Inflation (CPI) now being within the South African Reserve Bank’s target range of 3%–6%, the cost-of-living crisis continues to pressure consumers.
The rapid rate at which interest rates have increased and the sustained high levels over the last 12 months have put immense strain on credit-active consumers, particularly those with secured credit, the group said.
The report also highlighted a strong market demand for consumer credit, with application levels hitting record highs in Q4 2023. However, approval rates remain low at 32.2%, meaning approximately two-thirds of applications are rejected due to consumers' inability to take on additional credit commitments.
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