Banks are ‘standing up ‘ for borrowers

Banks have an important role to play not only in getting people into houses, but also in keeping them there, which is why they have been prepared to make some “tough calls” lately that could quite possibly lose them a substantial amount of new business.

Such calls include the controversial decision to re-introduce the deposit requirement for home loan borrowers, says Luthando Vutula, the new head of home loans at Absa, SA’s biggest mortgage lender.

Following on the heels of 10 consecutive interest rate rises and the introduction of the National Credit Act, the deposit requirement is likely to further reduce the number of potential buyers able to qualify for a home loan, “but is still considered necessary now to ensure that our customers are not exposed to over-indebtedness”, he says.

Speaking at the Homenet real estate group’s national conference at the Wild Coast Sun earlier this week, Vutula said the bank believed that by doing this, it would assist customers to make better buying decisions because they would have to contribute financially themselves if they wished to go ahead with a purchase.

“And while we all breathed a sigh of relief earlier this month when the Reserve Bank confirmed a 50 basis points increase in the interest rate, we can’t afford to assume this is the last increase we’re going to see this year. As a responsible lender, we also need to ensure that customers buying homes today have enough room in their budgets to weather the storm of possible future interest rate hikes.”

Looking ahead, he told conference delegates the next two to three years would see all players in the real estate industry having to innovate new ways of making money “while protecting our customers from short-term impacts that could derail their long-term investments”.

Meanwhile, he said, now was the time for serious property investors to start shopping around. “The best time to buy will be in 2009,” he predicted. “Patient investors will then be spoiled for choice and will be able to build a portfolio that will yield good results in years to come.”

In addition, he said that buying a home remained the single most important purchase any individual could make. “While the dynamics of the real estate sector may have changed since the boom years, a home remains a good investment that sets the foundation for wealth generation. At the moment, buyers may just have to adjust their expectations and start with a smaller home to ensure future affordability. Then when the cycle turns they will be in a position to upgrade to something closer to their original aspirations.”
Loading comments
More news articles
Guidelines to securing a home loan
29 May 2018
Many young South Africans are working hard to achieve their dream of purchasing their first home. However, the process can be challenging due to the daunting application process, which can take up to 2 years and is often enough to discourage prospective buyers.
read more
Things you should consider before upgrading to a new home
23 Apr 2018
The thing about the property ladder is that at some point in our lives we all have reason to want to climb a rung or two higher. Sometimes, it’s because we’ve outgrown our previous dream home, or because we want to be in a better neighbourhood that’s closer to work or to schools. Sometimes it’s because our circumstances have changed, and we’re taking care of elderly parents or relatives. Sometimes, it’s just because we want a property that reflects the financial status our hard work has won.
read more
Get pre-qualified
Make offers with confidence knowing what you can afford. Then shop for the best home loan
Bond Calculator
Calculate the estimated repayments on a home loan and savings with extra payments