Banks Increase Lending Rates

COMMERCIAL banks have increased their lending rates following the decision on Wednesday by the Bank of Namibia to increase the repo rate by 0,25 percentage points to 6%.

FNB Namibia said yesterday it had increased its prime rate and home loan rate effective from 25 August. The new prime rate will be 9,75% (up 0, 25% from 9, 50%) while the home loan rate increases from 10, 50% to 10, 75%.

Daniel Motinga, Head Research at FNB Namibia said the decision by the Bank of Namibia was based on their concern about household gearing and the impact of consumer spending on the balance of payments and specifically the foreign reserves.

“BoN will most likely largely follow the gradual pace provided by the South Africa Reserve Bank, given the weak global and regional macro backdrop,” said Motinga.

For consumers, he said the most important thing is not to borrow to try and meet short term needs.

Bank Windhoek also said it was increasing its Prime Lending Rate by 0,25% from 9,50% to 9,75% and its mortgage lending rate from 10,50% to 10,75%.

The changes will be effective from today.

Nedbank Namibia also announced a 25 basis point increase in its prime lending rate from 9,50% per annum to 9,75%, which will take effect on tomorrow. The Residential Home Loan base rate will be adjusted upwards with 25 basis points to 10,75% per annum.

Commenting on the decision by the central bank, the director of PSG Namibia Brian van Rensburg, said the decision to increase the repo rate is not that surprising, especially when considering that private sector credit growth remained elevated at 15,4% year on year in June, in addition to the fact that the cumulative trade deficit recorded during the first half of this year was already significantly wider than the deficit recorded for the whole of last year.

“On the other hand, inflationary pressure has shown signs of abating somewhat, while Namibia’s economic growth was particularly weak at the start of the year. We believe the BoN’s decision to increase the repo rate by 25 basis points signals a fairly cautious approach, possibly in recognition that economic growth still faces risks to the downside,” said van Rensburg.

As things stand now, the Namibian prime interest rate is 0,5 percentage points higher than its South African counterpart, which provides some breathing space in that regard, he said.

“However, a further interest rate increase later in the year is not out of the question and will depend on whether, and how soon, the higher interest rate environment will affect household demand for credit,” said van Rensburg.

Source : The Namibian