Banking changes improve access to home ownership

Even though prices are rising, the prospect of home ownership has been brought closer for many more South Africans over the past few months, thanks to some exciting shifts in bank lending practices.
These include declining deposit requirements and increases in both the number and size of home loans being approved, and their effects are revealed in the latest statistics from BetterBond, SA’s biggest mortgage origination group.
These figures show that 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% reached in February this year to just under 16% currently.
In addition, notes group chairman Rudi Botha, the average approved bond amountis now 8,3% 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 home ownership within reach again for many South African families.”
This is clearly reflected, he says, in the fact that the average household income required to purchase the average 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% in that time to R918 000. (See table)
The BetterBond group statistics, which covera 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,also show that applications from first-time buyers are on the increase again, following a slump in the nine months to end-March.
“First-time buyers accounted for 39% of all bond applications in July,” says Botha, ”which is still some way off the 45% mark reached a year ago, but a considerable improvement on the 35% low recorded in March.And here too, the big motivator has been the banks’ decision to slash deposit requirements from an average 14,6% of home purchase price in March to just 7,9% currently.”
Botha cautions, however, that while the banks may be on a drive now to increase secured lending such as home loans - which are a lot less risky for them than unsecured personal loans, overdrafts and credit card balances - their credit granting criteria are still very 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.The BetterBondgroup is currently able to get approval for close to three out of every four applications it submits, but our statistics show that over the past year, 56% of applications only succeeded on submission to a second or third lender,” he says.

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