Market on the move as home loan applications rise 23%

Home buying activity has increased substantially over the past 12 months, even though only about four out of every 10 bonds granted are for 100% of the purchase price.

That’s the word from Rudi Botha, CEO of BetterBond, SA’s biggest mortgage originator, who notes that the number of bond applications made by prospective buyers has been increasing steadily for the past few months, and showed a 23% year-on-year increase in October.

“This suggests that buyers have come to terms with the new home financing regime imposed in the wake of the National Credit Act and the global financial crisis, and are doing ‘whatever it takes’ to be able to go ahead with their home purchase plans. They see property prices going up again, and they don’t want to miss the boat, and at the same time, rentals are continuing to rise due to a shortage of properties to let.”

The BetterBond monthly statistics – which represent 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 the percentage of bonds granted for 100% of the home purchase price has averaged 40% for the past 12 months, meaning that six out of every 10 successful applicants have had to pay a deposit.

What is more, the average deposit requirement (except for first time buyers) has risen back up in that time to almost 20% or one-fifth of the home purchase price, says Botha.“And on top of that, the average price of homes being bought by those applying for loans through BetterBond has climbed 9% to reach R893 000 at end-October.”

Among first-time buyers, who account for between 35 and 40% of the home loans granted every month, the average home price has climbed 13% year-on-year to R629 000 at end-October, and the average deposit required is around 12% of the purchase price.

Meanwhile, notes Botha, homebuyers who do succeed in obtaining a 100% home loan currently can often only do so by agreeing to pay a premium interest rate as high as three or fourpercent above prime.

“And yet they are happy to do so, even if it means buying a cheaper property, because there is a steadily growing appreciation of the longer-term financial advantages of being a home owner, as well as an awareness that the property market is on an upward path once more, albeit slow.”

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