Banks in South Africa are approving home loans at levels not seen for 12 years

The banking industry continues to show confidence in South Africa’s property market by further relaxing their lending criteria and approving home loan finance at levels last seen 12 years ago.

This is despite weak economic fundamentals resulting in negative real house price growth.

Third quarter (Q3 19) statistics from home loan comparison service, ooba, shows that growth in the Average House Purchase Price flat-lined year-on-year from Q3 18 to Q3 19.

The Average Purchase Price for Q3 19 is R1,193,944 compared to R1,193,601 for Q3 18, continuing the trend of negative real growth in the local residential property market.

Ooba’s Q3 19 statistics also show 0% growth in the Average Purchase Price for First-Time Buyers.

“The positive news about negative real property price growth is that property is now more affordable for buyers. Cheaper property prices in real terms coupled with rising stock levels as house sales slowdown means buyers are able to find good value for money,” said Rhys Dyer, chief executive officer of ooba home loans.

“With more affordable property prices and bank approval rates at historical high levels, coupled with easing deposit requirements and lower interest rates, it is an ideal market for home buyers at present, especially first time buyers who do not need to sell a property,” he said..

The average deposit as a percentage of purchase price is down to 11.5% from 13% in Q3 18.  The average deposit for first-time buyers is even less, currently at 9.1% of the purchase price compared to 10.6% in Q3 18.

This is due to the increased appetite by banks to offer 100% home loans to both first and second time buyers with some banks extending their 100% finance offer to include the property transfer and bond registration costs, the home loan service said.

“Our statistics show that ooba’s home loan approval rate increased by 4.3% since the third quarter of 2018, with over 83% of our home buyers successfully securing a home loan. Year-on-year, ooba also recorded a 5% increase in the approval rate of our 100% finance applications,” Dyer said.

“This demonstrates that banks are meeting the increasing demand for finance from homebuyers who have no access to a deposit.  This segment of homebuyers represents almost 60% of our applications processed in Q3 19, up by 11% since the third quarter of 2018.”

The average interest rate that ooba achieved for its buyers in Q3 19 was 16 basis points cheaper than Q3 18’s rate. This is evidence of the strong competition among banks for new customers.

“Given that a 0.25% rate reduction equates to a saving of about R40,000 on a R1 million home loan over 20 years, it is worth comparing multiple quotations from banks,” said Dyer.

Read: Something has happened in South Africa’s housing market not seen since 2011


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Banks in South Africa are approving home loans at levels not seen for 12 years