December 8, 2021

South Africa’s affluent are struggling to pay off their home and car loans

In accordance to Experian South Africa’s Shopper Default Index (CDI), the speed individuals defaulted on their loans for the primary time decreased within the second quarter of the 12 months.

The CDI is designed to measure the rolling default behaviour of customers with home loans, car loans, private loans, bank cards and retail mortgage accounts.

Though client debt stays at R1.9 trillion, the index improved from 4.33 in March to a studying of 4.03 in June 2021, Experian mentioned. The credit score specialist mentioned that the development might be attributed to the stringent lockdown standards imposed 12 months prior, leading to considerably diminished credit score extension and thus an anticipated enchancment within the general CDI efficiency.

Jaco van Jaarsveldt, chief determination analytics officer at Experian Africa, mentioned: “We have seen new business volumes decrease since the onset of the Covid 19 pandemic, thus reducing the population from which first-time default stems. While we have seen the demand for credit improve to pre-Covid levels over the past 12 months, the supply remains constrained due to the continuous conservative lending criteria imposed by most lenders.”

At 4.03 in 2021 Q2, the year-on-year CDI is monitoring decrease than the all-time excessive of 5.68 noticed in 2020 Q2, following the preliminary stage 5 lockdown imposed on 27 Mar 2020.

“The CDI improved year-on-year across all products, most predominantly home loans, which improved from 2.90 in 2020 Q2 to 1.83 in 2021 Q2. Home loans account for more than 50% of the composite CDI and as such was the driving force behind the improvement, supported by improvement in all the other banking and retail products,” Van Jaarsveldt mentioned.

Over the previous 12 months (2020 Q2 to 2021 Q2), Monetary Affluence Segmentation (FAS) teams 1 and 2 have exhibited the least vital enchancment (CDI % change).

“Since the onset of Covid, we again see the most affluent consumers benefitting least from the improvement in CDI. There was a noteworthy impact on the Luxury Living group as they are highly exposed to secured credit resulting in a relative CDI improvement of 22%, moving from 3.85 in June 2020 to 2.99 in June 2021,” Van Jaarsveldt mentioned.

“The Aspirational Achievers group, also highly exposed to secured credit, saw a CDI improvement from 4.95 in June 2020 to 3.68 in March 2021, which is also relatively modest, compared to the improvement observed for less affluent FAS Groups.”

Experian famous that the affluent phase boasts an common opening home mortgage stability over R1.2 million and a median opening car mortgage stability larger than R450,000 – making them extremely uncovered to secured credit score.

The numerous enchancment in CDI in 2021 Q2 stems from credit score granted, significantly within the retail business, the place many suppliers opted for extra stringent lending standards together with the impacts of the laborious lockdown standards in the beginning of the pandemic.


The index seems to be at six macro Monetary Affluence Segmentation (FAS) in analysing its information:

  • Luxurious Residing (2.5% of credit score lively inhabitants) – Affluent people representing the higher crust of South African society with the monetary freedom to afford costly properties and vehicles;
  • Aspirational Achievers (9.3% of credit score lively inhabitants) – Younger and middle-aged professionals with the sources to afford a excessive stage of residing whereas furthering their careers, shopping for property and establishing households;
  • Steady Spenders (7.2% of credit score lively inhabitants) – Younger adults that depend on monetary merchandise to help in making ends meet or to afford particular requirements reminiscent of clothes and college charges, or seasonal luxuries;
  • Cash Aware Majority (40.0% of credit score lively inhabitants) – Older residents that are acutely aware of the place and how they spend their cash; usually in search of our monetary merchandise to cowl primary wants or for unexpected bills;
  • Laboured Residing (24.6% of credit score lively inhabitants) – Financially restricted as salaries are under nationwide tax thresholds, they spend their cash on primary residing requirements reminiscent of meals and shelter;
  • Craving Youth (16.4% of credit score lively inhabitants) – Very younger residents new to the workforce; this mixture of labourers and probably working college students earn low salaries and are restricted to spending on non-essential items.

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