Banks improve access to homeownership
Even though prices are rising, the prospect of homeownership has been brought closer for more South Africans thanks to shifts in bank lending practices.
These include declining deposit requirements and increases in the number and size of home loans being approved, and their effects are revealed in the latest statistics from BetterBond.
These figures show the average percentage of home purchase price required as a deposit when lenders are considering home loan applications has dropped from a two-year high of 23.3 percent reached in February this year to just under 16 percent currently.
Rudi Botha, group chairman, notes the average approved bond amount is now 8.3% percent up year-on-year and at its highest level since July 2011.
“These two factors, combined with the low interest rates we continue to enjoy, are more than compensating at the moment for higher property prices, and are thus also bringing homeownership within reach again for many South African families.”
He says this is reflected in the fact that the average household income required to buy a home is the same now (R44 000 a month) as it was 12 months ago, even though the average home price has increased 10.9 percent in that time to R918 000.
The BetterBond group statistics, which cover a quarter of all residential mortgage bonds being registered in the Deeds Office and include applications to, and bond grants from, all the major lending banks in SA, show that applications from first-time buyers are on the increase, following a slump in the nine months to end-March.
Botha says first-time buyers accounted for 39 percent of all bond applications in July, which is way off the 45 percent mark reached a year ago, but is an improvement on the 35 percent low recorded in March. He notes that the big motivator has been the banks’ decision to slash deposit requirements from an average 14.6 percent of home purchase price in March to just 7.9 percent currently.
However, Botha cautions that while the banks may be on a drive now to increase secured lending such as home loans - which are less risky for them than unsecured personal loans, overdrafts and credit card balances -their credit granting criteria are still strict.
“Potential borrowers are thus well advised to apply through a mortgage originator such as BetterBond which will employ a multiple submission process to different lenders in order to give them the best chance of success," he says.
The BetterBond group, he says, is currently able to get approval for close to three out of every four applications it submits, but statistics show that over the past year, 56 percent of applications only succeeded on submission to a second or third lender.
Author: Property 24