How common are 100% home loans in South Africa?

 ·16 Aug 2016
House cost buying home

New data by financial services company, FNB, finds that 100% mortgage loans are still a common offering by lenders in South Africa.

Using Deeds data for transactions undertaken by individuals, FNB found that homes where the bond registered is between 100% and 109% of the home transaction value, were estimated at 41.5% of the total number of bonds identified in the second quarter of 2016.

This percentage is slightly lower than the 43.1% multi-year high reached in the final quarter of 2015, but not sufficiently lower as to draw any conclusions regarding a possible declining trend yet, said FNB household and property sector strategist, John Loos.

These most recent estimates of the percentage of bonds falling into the 100-109% Loan-to-Purchase Price (LTP) band remain well-below the high point of 65% reached in the second quarter of 2007, but well above the post-boom low of 25.4% reached in the third quarter of 2009, FNB said.

During the first quarter of 2016 the bank identified 9,951 bonded transactions by individuals in the 100%-109% LTP range, more than double the 4,117 low of the third quarter of 2009, but well down on the 33,825 high reached in Q3 of 2006.

Unsurprisingly, FNB noted that people with lower value properties were more likely to take out a 100% loan.

FNB split the market into Quintiles based on the value of transactions by individuals. The top 20% of transactions by value are labeled ‘Quintile 1’, while the bottom 20% of transactions by value are labeled ‘Quintile 5.

The average transaction values per quintile were:

  • R2.442 million in Quintile 1
  • R1.057 million in Quintile 2
  • R658,922 in Quintile 3
  • R358,934 in Quintile 4
  • R84,376 in Quintile 5

Examining the distribution of Loan-to-Purchase Price Ratios (LTP) by price quintiles, the bank found that Quintile 4 is most highly dependent on 100%-109% loans, with the share of these loans making up 49.5% of its total mortgage loans to individuals in the 2nd quarter.

Quintile 3 is next with 42.2% of its loans in the 100-109% LTP bracket, while the lowest dependence on 100%+ loans is in the most affluent Quintile 1, at 22.1%.

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