Amnesty could be a Catch 22 for homebuyers

Clearly, there are at least two ways of looking at the credit amnesty that has just been approved by Cabinet, says Berry Everitt, MD of the Chas Everitt International property group.
Writing in the Property Signposts newsletter, he notes: “The amnesty provides for a once-off removal of all adverse information from consumers’ credit bureaux records, irrespective of value and even if the debt has not been paid – effectively giving everyone a ‘clean slate’. In addition, it provides for future paid-up debts and judgments to be removed from consumer credit records on an ongoing basis.
“And from the point of view of those consumers who have found themselves unable to obtain new credit because they are ‘blacklisted’ or have old ‘black marks’ on their credit records, this must obviously sound like really great idea. It must be especially appealing to those who are keen to buy their first home but have been refused a home loan because relatively minor credit transgressions, many of them long since rectified, are still reflected in their credit histories.”
Indeed, although no start date for the amnesty has been announced yet, the objective, according to a Cabinet statement, is to “address the issue of access to credit by consumers who may have paid their debts in full and are in a position to afford credit but whose access is currently impeded by negative credit information on their record”.
However, says Everitt, consumers do need to be aware that the banks and other credit providers have an entirely different view and have vigorously resisted the amnesty. Apart from worries about consumers seeing the amnesty as a debt pardon, they say it will make it much more difficult for them to assess risk when considering new credit applications.
“And because they will have no way of knowing who has been good at managing credit in the past, and who has not, they say, they may even haveto raise the price of credit – that is, the interest rates they charge – to cover their additional risk.”
This would of course make it more difficult to qualify for home loans, and shut many potential buyers out of the market again, irrespective of the credit amnesty, because they don’t have sufficient disposable income, he says
“In other words, the amnesty could well end up as a Catch 22 situation, with only one way out for prospective homebuyers: Pay down debts in order to increase disposable income and then save up a substantial deposit before applying for a home loan.”

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 15 Jun 2018
      The second quarter of 2018 has proven to be the turning point for Midrand’s real estate market, especially the upper end which started to waver towards the end of a tumultuous 2017 with a notable drop in both sales and average selling prices.
    • 15 Jun 2018
      According to data recently released by FNB, the average age of a South African home buyer has increased from 38 to 44 this year. In an attempt to help first-time buyers enter the market sooner, Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, walks us through the steps of saving for your first home.
    • 15 Jun 2018
      Putting your house on the market can be a stressful process. There are so many decisions to make that will impact how quickly your house is sold and for how much you can sell it for. It’s a serious money game where you can’t afford to make the wrong decision.
    • 14 Jun 2018
      The word tourist describes someone who is visiting South Africa for a limited time and is probably not going to buy a property here – so why is the tourism industry so important to the real estate sector?
    • 14 Jun 2018
      Serengeti Estates has entrenched its status as one of Johannesburg’s most desirable addresses for a spectrum of homeowners with its launch of The Signature Residences, a new cluster village.
    • 14 Jun 2018
      Keen interest shown at an international event in Hamburg last month has revealed that German investors have a surprisingly healthy appetite for South African real estate, especially those in the market for retirement properties.
    • 13 Jun 2018
      Well located urban properties, from that convenient city pad to the family townhouse or the coveted buy-to-let property can provide buyers with great investment returns over the long term. This is according to Fine & Country which have a number of offices in Johannesburg specialising in the sale of urban properties.
    • 13 Jun 2018
      A R200 million 51-unit luxury apartment project on a vacant lot at 169 Main Road Green Point places the capstone on the radical transformation of the stretch between de Waterkant and Glengariff Road.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us