Banks lend more, but only to the ‘right’ borrowers

The banks’ greater willingness to lend into the residential property market over the past 12 months, as well as the extent of the recovery in that market, is evident in the latest statistics released by BetterBond Home Loans, which accounts for more than 25% of all residential mortgages registered in the Deeds Office and is SA’s leading bond origination group.
“The figures show that our average home loan approval rate for the past 12 months was 77%, compared with 69% in the previous 12 months,” says BetterBond CEO Shaun Rademeyer, “and that the value of home loans approved through BetterBond showed a year-on-year increase at the end of April of 9,5%, to a total of almost R39bn.”
What is more, he says, much of this value increase came from year-on-year growth of almost 7% in the actual number of home loans approved, despite a slower rate of growth in the number of home loans applications being submitted since the interest rate increase in January.
“Nevertheless, home prices do continue to increase, driven largely by supply constraints in many of the most popular areas. The average home purchase price paid by our clients showed a year-on-year increase of almost 12% at end-April to just over R900 000, while that paid by first-time buyers showed a year-on-year increase of 8% to R636 000.”
Meanwhile, Rademeyer says, the BetterBond figures show that the banks’ initial decline ratio (the percentage of bond applications that are rejected by the first bank to which they are submitted) went down to 31% in the 12 months to end April. “This is well-down on the 37,6% recorded in the previous 12 months and a far cry from the 50% and more recorded after the 2009 recession, and it indicates both a greater readiness to lend on the part of the banks as well, perhaps, as a better quality of applications.
“We find, for example, that many more prospective homebuyers are now lowering their other debt commitments and saving up a deposit before applying for a home loan. This tallies with Reserve Bank figures which show that the household debt to disposable income ratio has dropped from a high of around 84% just before the recession to about 73% now, and with the continuing decline in the number of home loans being approved for 100% of the property purchase price.”
The BetterBond statistics also show that the percentage of purchase price paid as a deposit has declined to an average 18,65% in the past 12 months, compared with 18,86% in the previous 12 months, while the percentage paid by first-time buyers has declined even more, from 11,74% to 10,74%.
“This would seem to indicate that the banks are a little more relaxed about mortgage lending, but it is worth noting,” says Rademeyer,“that this may be because they are increasingly discerning  about who they lend to, whether those applicants are existing clients or not, as evidenced by the fact that the percentage of the total loan applications that are rejected by clients’ own banks before being ‘rescued' by us and approved by a different bank continues to rise.
“This percentage reached 10,6% of total applications in the 12 months to end-April and once again underlines the advantage of working with a reputable originator like BetterBond that is able and willing to motivate individual applications and submit them to multiple lenders.”

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