How much money the average South African owes on their car and house right now

New data from TransUnion shows how much the average South African owes on their vehicle purchase and home loan, based on figures in the fourth quarter of last year.

The findings are contained in a Q4 2020 South Africa Industry Insights Report from the credit reporting agency.

TransUnion said that the vehicle finance market is showing signs of recovery as the rate of originations decline and delinquencies decelerate. Balance growth has been driven by higher new account loan amounts as consumers shift toward higher priced vehicles.

The home loan market also shows signs of a rebound as balance growth ticked up and origination growth improved. The overall trend in rising delinquencies is a concern that requires urgent attention, TransUnion said.

During the latest period, enquiries—a measure of consumer demand—and originations—a function of both supply and demand—both fell across all major consumer credit categories. At the same time, delinquencies continued to climb for most products with the exception of credit cards, which saw a marginal improvement, it said.

The increase in missed payments also contributed, in part, to an increase in outstanding balances across most product categories.

Where lenders are advancing new credit card accounts, analysis suggests they are focused on less risky consumers, TransUnion said.

Vehicle Finance

New vehicle finance loans saw the smallest YoY decline of just -6.0% in Q3 2020.

Compared to the YoY fall of -53.7% in Q2 2020, which followed the economic impact of the initial wave of Covid-19, it was a significant improvement in annual trends.

Vehicle finance balances (up 10.2% YoY Q4 2020) increased as price inflation rose in the most recent quarter, driving higher amounts for new loans originated.

The latest TransUnion South Africa Vehicle Pricing Index (VPI) showed a 9% fall in agreement volumes, but a 9.6% increase in the VPI for new vehicles.

Refinancing options, low interest rates, renewed purchasing activity in the latest quarter, and a shift towards higher-priced vehicles (validated by higher average new account loan amounts which increased by 6.5% YoY to R320, 183) have all contributed to this increase.

Vehicle finance serious-level delinquencies have been steadily deteriorating for the past three years, up by 76% over this time, and stood at 7.1% in Q4 2020. TransUnion recently conducted a study aimed at uncovering performance drivers for the auto market to better understand the cause of rising delinquencies.

“Our findings indicate that the industry dynamics of longer terms and higher loan-to-values coupled with higher risk appetite has caused this increase in delinquencies.”

Vehicle finance loans delinquency rates remained broadly unchanged, increasing by just 20 basis points over the same period after several quarters of accelerated delinquency deterioration. The relatively stable performance of this category compared to others reflects the relative payment priorities of South African consumers as they focused on preserving the convenience and perceived safety of private vehicles during the pandemic.

Home Loans

Home loans also recorded a comparatively lower fall of -14.2% YoY in the most recent quarter (-62.4% YoY in the previous quarter).

“This is a positive indicator of a rebound in demand and supply in the credit market. Loans that were granted during the period were at much higher values as observed by the considerable increase in average new loan amounts (31.6% YoY), the credit reporting firm said.

With interest rates at an all-time low, affordability for many South Africans has increased, allowing for much larger home purchase values than before. As a result, home loan balances increased (up 6.1% YoY Q4 2020).

“Consumers have also been investing in their homes due to work-from-home pandemic circumstances, it said.

Account-level serious delinquency rates (3+ MIA) increased YoY by 230 bp to 6.8% in Q4 2020. “While this increase is smaller than previous quarters, this delinquency deterioration trend requires intervention, especially as home loan lenders increase their exposure by financing a greater portion of the total price of higher loan amounts.”

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How much money the average South African owes on their car and house right now