He was commenting on the SA Reserve Bank's Monetary Policy Committee (MPC) which decided to leave interest rates unchanged at its second 2011 meeting, which ended yesterday, 12 May 2011. The MPC left the repo rate unchanged at a level of 5.5%. As a result, banks will keep the prime interest rate at a level of 9%.
"Customers are beginning to pay. However, there are heavily entrenched debtors who remain in the legal portfolios. These customers would benefit from the unchanged rate," says Opperman.
He points out that the rate cuts since late 2008 up to late 2010 have caused vehicle and mortgage finance to become more affordable, impacting positively on vehicle sales and property transactions but cautions that although the current low interest rates may encourage consumers to consider purchasing higher priced vehicles than they would otherwise have considered, vehicle price affordability will remain a key consideration for consumers.
"Consumers should bank the savings that they have realised on their vehicle and mortgage finance instalments since the reductions of interest rates began in 2008 and reached their lowest levels in more than 30 years."
Looking ahead, he observes that food, fuel price hikes and other inflationary pressures may lead to monetary policy tightening towards year-end and early 2012.
"As a result, consumers should live within their means, making use of a budget of income and expenses, eliminate unnecessary spending on luxury and non-essential items, saving on a monthly basis, and paying cash for purchases where possible."
Vehicle price affordability, which he expects will remain fairly stable in 2011, together with other economic indicators, will continue to encourage sales in the motor industry. However, the effects of the Japanese tsunami on the stock supply of vehicles and vehicle components may reduce sales.
"Most of the vehicles sold are expected to be in the small to medium-size segments. Affordable and entry-level vehicles will still be the focus, as consumers remain conscious of cost/value considerations, including the running costs associated with smaller fuel efficient vehicles," he concludes.
