Mortgage bond defaulters causing banks to tighten loan criteria

A recent National Credit Regulator report says that in the third quarter of 2013 approximately 70,000 South African home owners were 90 or more days behind in their mortgage repayments.  The report added that defaulters owed the banks about R38 billion, which is just over 12% of the total home loans of R308,9 billion.

These figures, says Bill Rawson, Chairman of the Rawson Property Group, help explain why the banks have to be ultra-cautious in lending to the home mortgage market.  However, he says, if, as many economists now predict, the era of low-low interest rates is coming to an end, we could see as much as a 2% rise in the rates within the next year and the likelihood is that defaulters will again increase in number. There is a growing danger that if this happens, the devastation in the property market caused by the banks and their disciplinary/rectification measures in 2009 to 2011, will be repeated.

“The banks’ reaction to the average defaulter’s problems in the recent global downturn was in most cases to repossess the home.  In doing so they effectively destroyed the residential property market for two years, causing prices across the board to drop by 10% to 30%.  We in this sector, i.e. those responsible for selling homes, now plead that a different approach be adopted this time if and when the number of defaulters increases again.”

Asked to define what these different measures might involve, Rawson said that as the banks and mortgagees suffer severe financial losses when repossessions take place and judicial liquidations are imposed, he hopes that in future, in consultation with the estate agency fraternity, the banks will work with defaulters to find solutions which will not involve them losing their homes.

“Many of us in the estate agency sector,” he said, “suspect that the losses the banks incur when they do resort to the drastic action of repossession are probably greater than the losses that would be incurred by taking a more lenient attitude to defaulters and finding a solution in conjunction with them.”

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 22 Feb 2018
      An excellent credit score is one of the most priceless assets a potential home buyer can have. This tool has the power to secure favorable mortgage and refinancing rate, influencing everything from the size of the loan repayment to the interest rate on the home loan.
    • 22 Feb 2018
      What do you do if you love your home’s location and the area, but the home no longer fits your growing family’s needs? Do you stay and renovate your existing home or find a home that meets your developing criteria?
    • 22 Feb 2018
      While every owner wants to sell their property at the best possible price, overpricing a home can be the kiss of death for a sale.
    • 21 Feb 2018
      Given the hand they were dealt, government has performed a delicate balancing act which it is hoped will serve to reignite confidence in investment in South Africa, regain our global credibility and satisfy the credit ratings agencies, says Dr Andrew Golding, chief executive of the Pam Golding Property group.
    • 21 Feb 2018
      The real estate mantra, ‘location, location, location’ remains a strong market influence regardless of the prevailing economy, with suburbs like Rondebosch enjoying the buffering benefit of being ideally situated.
    • 21 Feb 2018
      These days most buyers are using online property portals like Private Property when house hunting due to the convenience, up to date information and variety on offer. “The property portals have revolutionised the way buyers shop, but they do need to be cautious – viewing photos online is no replacement for viewing the property in person,” says Bruce Swain, CEO of Leapfrog Property Group.
    • 20 Feb 2018
      Owning a home is a milestone that most South Africans aspire to. Becoming a homeowner is a step towards growing personal wealth and owning an asset that appreciates in value over time, provided of course that the correct principles are applied during the buying stage of the process, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
    • 20 Feb 2018
      The suburb of Greenstone in Johannesburg east came to be over the last two decades. “In the beginning, it was literally just a hill with not so much as a shopping centre,” says Michael Levy, Property Consultant at Jawitz Properties Bedfordview. Today it has plenty shopping facilities and is fully built, boasting high-density, upmarket housing and residential estates, though still has a few pockets poised for commercial development.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us