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Higher incomes needed now to qualify for bonds, says BetterBond

According to the latest statistics from BetterBond Home Loans, SA’s biggest mortgage origination group, home buyers in SA now need to earn a gross monthly income of around R30 000 to buy an average home costing some R952 000.
 
The BetterBond figures also show that 64% of buyers currently have to pay a deposit in order to secure a home loan, and that the average deposit required for a home priced at R952 000 is around R99 000 – or 10,4%.
 
“This puts the average home loan required to buy such a home at R853 000, and the average monthly bond repayment at just over R7400,” says BetterBond CEO Shaun Rademeyer.“Now in the days before the National Credit Act, when the simple rule-of-thumb was that your monthly bond repayment should not exceed 30% of your gross salary, that would have meant that a gross salary of R24 700 was enough.
 
“But in terms of the Act, banks are obliged to try to stop consumers from becoming over-indebted. So when they consider a home loan application they must now also take into account your existing debt commitments and regular monthly expenses and see if there is enough disposable income left over to comfortably cover the monthly bond repayment.
 
“And because of the high household debt levels in this country, and the continually rising cost of food, transport, utilities, healthcare and education, most prospective homebuyers need to have higher earnings now in order to ensure that there will be a big enough amount ‘free and clear’ every month to cover their bond instalment.”
 
Things are a little easier for first-time buyers, says Rademeyer, with the average home price in this sector of the market having risen by just R27 000 in the past 12 months(see table) anddeposit requirements having shrunk considerably to between about 6% and 10%
 
“What is more, about two-thirds of the 100% bonds that are being granted are going to buyers at the affordable end of the market where most buyers tend to be first-timers.”
 
In any case, he notes, the banks’ still-strict lending criteria do not appear to have put much of a damper on the demand for home finance – or in fact on the banks’ willingness to lend to qualifying applicants.
 
The BetterBond statistics show a 3,75% year-on-year increase in November in the number of home loan applications received and, even more significant,  a 14% increase year-on-year in the number of applications formally granted (that is, approved and taken up by the borrowers).
 
The figures also reveal a 10,5% year-on-year drop in November in BetterBond’s initial decline rate (the percentage of applications declined by the first lending institution to which they are submitted) and a15% year-on-year increase in the ratio of applications declined by one bank but approved by at least one other.
 
This took the group’s average approval ratio to 76% in November, which means that it is securing a bond approval for at least three out of every four of its applicants – and the statistics reveal that about 80% of these approvals are taken up by borrowers and converted to formal grants.


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