Strong indications show that, after a three-year lull, the Battle of the Banks for home loan market share is about to heat up again – to the benefit of homebuyers and the property market in general…

“This month’s decision by major lender Absa to once again start accepting applications for 100% loans from mortgage originators (Mortgage Plus) is, we believe, just the first salvo in the renewed battle”

“The move will no doubt prompt counter-measures from the other banks anxious to retain and gain top quality clients, and shrewd consumers will be the real winners.”

There will no doubt be many people, he says, who believe this scenario is wishful thinking on his part, “but even now, most lenders are already offering bonds of up to 100% to their own existing clients in good standing – and bonds of 90% on average to new clients – despite their stated determination just a few months ago to insist that every potential borrower pay a sizeable deposit.

“What is more, I am not suggesting that the banks will immediately relax their lending criteria. Bond applicants will still need to have excellent credit records, low debt loads and good employment prospects in order to be approved – just now perhaps they won’t need to have such a large sum of cash on hand to pay a deposit and cover transfer costs.”

Prinsloo says that in due course – and if inflation tails down later this year as expected – the banks will probably also become more negotiable once again on interest rates.

“Meanwhile, bond applicants can at the very least expect higher levels of service and faster response times, as banks increasingly relearn that home loan borrowers are very often the most loyal consumers of their other, very profitable, banking products and services – and not just a high-risk nuisance as they have often been viewed in recent years.”

From an industry point of view, he says, the results of this shift in attitude will be an increase in the number of loans granted, and a decrease in the number of “repeat” sales for estate agents. “Indeed, originators are already reporting an increase in volumes of loans being approved over the past few weeks, and that will inexorably lead to surplus stock being absorbed and home prices starting to show real increases. In short, it will open the way to the proper recovery of the market over the next two to three years.”

Please contact us if you require any further information or would like to apply for finance:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za

Self-employed Home Loans

The banks have become a lot more cautious when assessing self-employed mortgage bond applicants.

Gone are the days that an income letter from an accountant, supported by six-month bank statements, sufficed. In this challenging economic climate, banks want to scrutinise the stability of the organisation before they will consider a self-employed applicant as a viable debtor, irrespective of the security offered as collateral.

It’s now all about affordability and sustainability! So how do self-employed entrepreneurs ensure that they are first in line when it comes to laying their hands on some of the available funds in the banks’ coffers?

It is advisable to have separate business and personal current accounts. The turnover through these accounts will be compared with all financial statements and income declarations. If these figures don’t coincide, self-employed individuals must be prepared to submit their latest income tax assessment as proof of income.

Effective administration systems are vital, with all documents up to date, accurate and readily available. The banks will require a full set of signed-off financial statements with comparable year-on-year (y/y) figures and management accounts from the previous financial year to date. And as if this is not enough, certain banks are even calling for cash flow projections.

Banks will only accept income letters and signed-off financial statements from a registered accountants or bookkeepers. Business owners must ensure that their accountants or bookkeepers are registered with one of following institutions:
- The Institute of Administration and Commerce of Southern Africa
- The Chartered Institute of Management Accountants.
- The Southern African Institute of Chartered Accountants.
- The Southern African Institute of Chartered Secretaries and Administrators.
- The Chartered Association of Certified Accountants.
- The Southern African Institute of Business Accountants.
- South African Institute of Professional Accountants (SAIPA).

Lending policies differ from bank to bank, with some banks only accepting application for self-employed individuals who have a business account with them, while others will only consider this if the applicant is willing to put down a substantial deposit. Where some may be tad more flexible, others will stick to their rules no matter how strong the mortgage bond application may be.

Mortgage bond applicants will only be made aware of which of the four commercial banks is more likely to approve their application if they deal with a professional independent mortgage bond consultant (Mortgage Plus bond originators).

In recent months, we have seen many a small and medium enterprise (SMME) downsizing, consolidating and restructuring, with some even having to close their doors altogether. This, coupled with the banks’ lack of appetite for risk, has led to some of the most stringent credit criteria being applied to self-employed entrepreneurs. Good governance and sound business practice is the rule of the game.Unfortunately, those with the money to lend lay down the rules and those in need will just have to comply.

Please contact us if you require any further information or would like to apply for finance:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za