ooba introduces new affordability tools as banks compete for new home loans business

Third quarter statistics (Q3 2017) from ooba, South Africa’s leading bond originator, show nominal positive growth of 3.3% on Q3 2016 in the average House Purchase Price. When inflation is factored in, the Average Purchase Price has delivered negative growth in real terms. The property market has endured decelerated real price growth for almost two years now. This is unsurprising given the economic environment and political uncertainty.

 A price spike of 6.1% on Q3 2016 in the First-time Buyers (FTB’s) average purchase price was recorded in Q3 2017, above the current inflation rate of 5.1%, yielding a real price growth of 1%. Rhys Dyer, CEO of ooba, says: “Last quarter we were concerned about the lacklustre year-on-year growth of 2.9% in the FTB’s Average Purchase Price. Slower demand for entry-level properties is a symptom of affordability challenges, as FTB’s tend to be more sensitive to economic downturns. We are relieved to see a bounce back in the FTB Average Purchase Price, as the demand for entry-level properties picks up in line with the global trend to increased urbanisation.”

Says Dyer: “2017 continues to be a tough year for the residential property market as the subdued economy squeeze consumer purchasing power, along with political uncertainty, negatively affect consumer confidence. Despite these drawbacks, ooba’s Q3 2017 statistics indicate much more favourable home loan conditions.” 

 It is clear from the statistics that banks have intensified their competition for home loans. The recent drop in the prime lending rate and expectations of further rate cuts have created a more positive sentiment and improving affordability for home loan financing. ooba’s higher approval rate in Q3 2017 of 73.6% compared to Q3 2016’s 71.5%, coupled with a significantly improved average interest rate of prime plus 0.34% in Q3 2017 compared to prime plus 0.46% in Q3 2016, evidences the strong competition amongst banks for new home loans business. This is strongly positive for the consumer.

As can be expected in the current economic environment, in Q3 2017 ooba experienced an increase in the number of homebuyers looking for home finance, who have no access to a deposit. 48% of homebuyers who purchased properties in Q3 2017 applied for 100% financing, compared to 44% in Q3 2016. Approval rates for 100% bond applications have also shown a year on year improvement, up from 70.7% in Q3 2016 to 71.3% in Q3 2017.   

Dyer believes that although the current market presents an opportune time to invest in property, buyers need to ensure they have an impeccable credit rating and adequate affordability before applying for a home loan.  

One of the reasons for the increased approval rate that ooba is seeing is the increased number of prospective home buyers who are taking advantage of the tools available in the market to pre-qualify themselves before applying for a home loan. We have seen a significant increase in the number of buyers who are availing themselves  of two new tools offered by ooba – the ooba Bond Indicator (OBI) and the ooba Qualified Buyers Certificate (OQBC).

Dyer explains: “Unlike a simple bond affordability calculator, the OBI is an online, self-service, paperless application. Within a few minutes, buyers not only have a clear view of their credit score and credit profile, but also have a summary of their affordability and a realistic indication of their price ceiling. 

“The ooba Qualified Buyers Certificate increases the level of accuracy of the OBI, as the buyer’s information is checked and verified by an expert. The OQBC comes into play once a buyer is ready to submit an offer to purchase. Over 80% of bond applications that include an OQBC are approved by banks,” concludes Dyer. 

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