Banks lent even less money to people wanting to buy a home in February and statistics show that mortgage advances declined from 3,8% in January to just 3,4% in February according to data released by the South African Reserve Bank.

Outstanding mortgage balances in the household sector increased by 4,1% year-on-year in February after rising 4,6% in January. On a monthly basis, household mortgage balances were up by R2,8-billion in February compared with the previous month.

According to Jacques du Toit, senior property analyst at Absa Home Loans, the declining trend in mortgage advances is believed to be related to various factors including the ratio of household debt to disposable income that was at 77,6% at the end of last year.

“The percentage of credit-active consumers with impaired credit ratings remained high at 46,5%, in the final quarter of 2010 and this situation impacts on the consumers’ ability to take up credit against the background of the National Credit Act. Moreover, the banks’ lending criteria remained strict,” says Du Toit.

He says that significant increases in the fuel price and rising food inflation are also having an impact on consumers emphasised by the fact that consumer confidence had fallen in the first quarter of this year.

Total mortgage advance reach R1 047,6-billion in February this year, while mortgage advances to households at the end of February were at R764,2-billion equivalent to 73% of the total.

Du Toit says that mortgage advances growth is forecast to remain in single digits for the rest of this year.

“The cost of servicing household mortgage debt as a percentage of disposable income was around 4,3% in the last quarter of 2010. This was the net result of trends in growth of household mortgage debt – that increased by 0,9% during the period – and a lower mortgage interest rate,” says Du Toit.

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With house prices firmly back on an upward trend and banks beginning to relax their lending criteria for home loans, consumers are increasingly looking to get back onto the housing ladder.

As the property market becomes more competitive, however, it is vital for consumers to make sure they are well prepared and can act quickly when an offer is accepted.

Craig Deats – has the following advice for potential homebuyers when applying for a home loan to ensure they have the ultimate opportunity for success on their bond applications.

1. Make sure you are aware of all the costs involved in buying a home. In addition to arranging a home loan and paying a deposit there are a number of other costs involved including legal costs, transfer duty, bond registration fee and bank charges. These will need to be paid in order to complete the process.

2. It is advisable to have a clean credit record before applying for a home loan. As a result of the National Credit Act and current market conditions, banks have tightened their lending criteria and a negative credit record may impact the result of your home loan application.

3. Provide your bank or bond originator upfront with all required information and documentation requested. Each bank has their own set of criteria so ensure that you have met the requirements of each lender.

4. Make use of a reputable bond originator, who can assist you by facilitating bond negotiations with all major lenders in one simple process from prequalification to registration, with less hassle and minimal paperwork. They also provide regular feedback of progress on your application.- www.mortgagepluscc.co.za 

5. Shop around with multiple lenders. According to the latest statistics, 19.8% of applications in January 2010 that were declined by one lender were approved by another, indicating that it is important to approach multiple lenders to ensure a positive outcome on your home loan. Shopping around also ensures that you get the best rate on offer.

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