Home loans up as banks relax lending rules

At the height of the property boom in 2006, South Africa’s four major banks were approving an average of more than 30 000 new home loans every quarter.

During 2009 this number had dropped to well below 8 000 as banks tightened lending criteria considerably in response to the global financial crisis, as well as factors such as interest rate increases, high household debt ratios and the effect of the National Credit Act.

However, with sharp cuts in the repo rate over the past couple of years, the prime lending rate has dropped to below its 2006 level and, according to property analysts, all indications are that banks have been slowly relaxing their lending criteria again. The result is that the number of new home loans approved is on an upward trend again, having increased by 10 percent since 2009.

Mortgage Plus recently completed a study of the number of home loans approved per quarter and loan-tovalue ratios of the four major banks – Absa, Standard Bank, FNB and Nedbank – from 2006 to the first quarter of 2011, to assess whether the strict lending criteria applied over the past few years since the economic crisis have eased.

“There is a slow and cautious recovery and there has been a slight drop in the first quarter of 2011, with fears of a double dip recession being mooted. But an upward trend in new lending for the residential market indicates that banks are developing more of a desire for risk,” says analysts .

“Boosting indications that lending criteria have relaxed is the fact the loan-to-value (LTV) ratios are on a similar upward trend. After dropping from an average for all banks and all market segments of almost 90 percent in 2006 to just 79 percent in 2009, they have climbed back up to an average of 82 percent since the first quarter of 2010.”

She says there is a significant difference in LTVs, however, once these are assessed in terms of market segment. Poorer households are accessing home loans of over 90 percent LTV whereas the LTVs for the comfortably off and super-wealthy are around 80 percent and 75 percent respectively.

“A number of factors account for this trend. The first is affordability – it is often simply the case that comfortable and wealthier buyers have cash to put down deposits and have often sold previous homes at a profit, whereas those buying in poorer areas may not have savings or the profits from the sale of a home to invest.

“However, it should also be considered that much of the bad debt on the banks’ books after the downturn in property values and rising interest rates caused many homeowners to default, came from the wealthier sector and higher-priced homes. Also, there has been pressure on the banks to contribute towards South Africa’s low-cost housing backlog by making home loans more accessible to lower income earners.

“There has been comment from the property sector that the strict lending criteria are a major factor constraining house price growth, and that in light of low interest rates this approach may be too conservative – creating something of a buyer’s market,” says Ivins.

However, she says, there is clearly light at the end of the tunnel.

“Interest rates are low, home loan accounts are performing better and lending criteria should become more lenient, which should stimulate prices and demand as household debt comes under control and banks resolve the distressed property sales and properties in possession still on their books.”

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

Standard Bank Home Loans

If you ready to purchase that property you have always wanted why not apply for Standard Bank home loans?

Standard Bank is one of the leading home loan institutions in South Africa and has assisted millions of individuals to obtain their dream homes. It has been able to do so as Standard Bank home loan branches can be found all over the country and is easily accessible.

Standard Bank complies with the National Credit Act of 2005 (NCA) and sound banking principles are followed which ensures that a professional service is rendered to individuals. Standard Bank also uses state of the art technology which allows for speedy home loan application and results.  In fact, many South Africans are pleased to find a Standard Bank branch in many overseas countries in Europe.

But how can one go about to obtain a Standard Bank home loans and what does it entail?

Firstly individuals will have to proof that they earn a fixed monthly salary of at least R6000 on a single or joint salary.

When applying for a Standard bank home loan through Mortgage Plus, individuals will require to submit other information such as the green South African I.D. document, proof of permanent residency and salary slips will have to be submitted with the actual signed application.

First time home buyers could qualify for a 104% loan where the additional 4% is to assist with transfer and registration fees.  Individuals may also apply for an AccessBond where individuals are allowed to transfer surplus funds to other Standard bank linked accounts.  Installments will also increase if available money is transferred out of the AccessBond.

Ordinary Standard Bank home loans are only offered to the loan to value of 95% where the individual will have to provide the additional 5% of the bond and cater for other bond costs.  Individuals normally provide the outstanding amount in cash or via a personal loan.

Various options are available to cater for customer specific needs and include interest rates which are either fixed or variable.  Fixed interest rates on a Standard Bank home loan simply means that interest charged on your home loan will never change even if country wide interest increase or decrease over time.  Current interest rates, as from November 2010 on Standard bank home loans are charged at 9% (and is variable) but individuals may be charged at a higher or lower rate depending on their credit score rating.

Insurance to cover the value of the structure is also compulsory and need not necessarily have to be taken out through Standard Bank. Standard Bank offers two types of structural insurance:

• Home Loan Protection Plan
• Home owner’s Comprehensive Insurance Policy

Mortgage Plus Home Loan division may also provide individuals with a Pre-qualification certificate which is valid for three months. It allows individuals time to shop around for a property of their choice. It could speed up your application process and Standard Bank will only need to assess the actual property for the final process.

Interested individuals can also use the Mortgage Plus website to calculate and apply for Standard Bank home loans and to find other valuable information.

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