South Africans received some financial breathing room from lower interest rates and access to retirement savings under the two-pot retirement system in the first quarter of 2026, but new data suggests financial pressure has not disappeared; it may simply be showing up in different places.
The latest DebtBusters Debt Index shows consumers continued to face elevated debt burdens despite an easing in borrowing costs, with signs that credit stress is becoming increasingly concentrated among higher-income households, while lower-income consumers appear to be losing access to credit.
The index is based on consumers who applied for debt counselling and therefore reflects trends among financially stressed households rather than the broader South African population.
Benay Sager, the executive head of DebtBusters, said interest in debt counselling softened slightly during the quarter, which the group said may partly reflect the cumulative effect of interest rate reductions and access to two-pot retirement savings.
At the same time, subscriptions to online debt management tools increased by 23% compared with a year earlier.
“What remains consistent is that debt burdens are elevated, and income growth is not keeping pace with rising costs,” Sager said.
Consumers who applied for debt counselling during the quarter needed 64% of their monthly take-home pay to service debt. Although this has improved from the peak of 73% recorded in the first quarter of 2021, the level remains high.
The data suggests debt pressure was most pronounced at the top end of the income scale.
Consumers earning more than R50 000 a month needed 101% of their monthly take-home pay to meet debt obligations before entering debt counselling. In practical terms, this means some consumers in this income band were already committing more than their full monthly salary to debt repayments before covering other living costs.
The picture becomes more nuanced across the other income groups. Consumers earning below R10 000 a month also spent a substantial share of income servicing debt – 64% of take-home pay – but carried materially lower overall debt exposure, equivalent to 83% of annual net income.
By contrast, higher earners appeared more leveraged. Consumers earning between R35 000 and R50 000 carried debt equivalent to 239% of annual income, rising to 303% among those earning above R50 000.
This suggests that although lower-income consumers in the sample remain constrained by day-to-day affordability, higher earners tend to carry larger debt balances relative to earnings and may therefore be more exposed to changes in borrowing conditions.
According to Sager, the figures point to continued financial pressure among higher earners despite recent relief from lower borrowing costs.
A tale of two debt markets
Although average income growth has broadly kept pace with consumer inflation since 2021 – average net income increased by 25%, while CPI rose by 27% – the index suggests the headline figures mask a more uneven picture.
Income gains differed across income groups, with several bands showing limited improvement relative to pre-pandemic levels despite the increase in average earnings.
At the same time, consumers appear to be relying more heavily on unsecured borrowing to close the gap.
Among new debt counselling applicants, 96% had a personal loan and 61% had a one-month or payday loan – both record levels. The average number of credit agreements per applicant increased to 8.5, the highest level since 2017 and up sharply from a low of 7.1 in 2023, pointing to a resurgence in multi-lender borrowing.
Average unsecured debt levels are now 23% higher than in 2021.
For consumers earning more than R50 000 a month, unsecured debt levels were 99% higher than in 2021 – significantly outpacing both inflation of 27% and salary growth of 6% for that group.
Total debt tells a different story across income groups.
Top earners’ total debt has increased by 42% since 2021, exceeding inflation, while lower-income consumers have seen debt levels decline by as much as 25%.
According to the report, the decline among lower-income groups appears to reflect reduced access to credit rather than an improvement in financial health.
“Unsecured loans are being granted to a smaller group of consumers, highlighting that risk is being concentrated in an even smaller group,” Sager said.
Separate data included in the report shows average unsecured loan sizes have increased by 66% since 2016 even as the number of new unsecured loans declined by 20%, suggesting lenders are extending larger loans to fewer consumers.
Rate relief helped – but costs remain elevated
Borrowing costs continued to ease during the quarter in line with previous South African Reserve Bank rate reductions.
The average interest rate on unsecured credit declined to 17.9% a year, although the median remained significantly higher at 20.3%, reflecting wide variation in pricing across borrowers.
Average vehicle finance rates stood at 13.6%, while home loans averaged 10.2%.
The share of home loan debt among applicants has fallen from 30% in the second quarter of 2023 to 20% in the first quarter of 2026, which the report attributes to the impact of rate reductions implemented between late 2024 and 2025.
Yet consumers remain under pressure from the cost of living.
The index shows that although average net income increased by 25% since 2021, key household costs increased more rapidly in several categories. Consumer inflation increased by 27%, petrol prices rose by 36%, and electricity tariffs climbed by 85% over the same period.
The comparison suggests that headline income growth does not necessarily translate into improved financial conditions for all households. The report noted that lower-income consumers may effectively have experienced inflation rates that were 2% to 4% higher than headline CPI because a larger share of spending tends to go towards necessities such as transport and utilities.
For consumers earning between R10 000 and R20 000 a month – described in the report as the backbone of South Africa’s working population – almost one-third of disposable income is spent on food alone, leaving limited room for insurance, savings, or unexpected expenses.
Financial pressure may be showing up earlier
The data also suggests financial pressure may be affecting consumers earlier in adulthood.
People born after 2000 accounted for 9% of new debt counselling applicants during the quarter, while the average age of applicants remained 39. Consumers aged 45 and older now represent a larger share of applicants than a decade ago.
The report also recorded a continued increase in the number of consumers completing debt counselling programmes and repaying creditors.
Sager said interest in online debt management tools remained strong, particularly among younger consumers, although the group did not attribute this trend solely to worsening financial conditions.
DebtBusters expects financial pressure on households to remain elevated as consumers continue navigating higher living costs and an uncertain inflation outlook.
