The average home loan balance in South Africa

Consumer credit reporting agency, TransUnion has published its South African Industry Insights Report (IIR) for Q4 2019, providing a view of the state of the consumer credit market in the latest quarter prior to the outbreak and spread of Covid-19 in South Africa.

The report shows that the consumer credit market resisted mounting recessionary pressures and continued to grow.

Both outstanding balances and originations (a measure of new accounts opened) across all major product categories showed a year-on-year (YoY) increase. However, it appears this growth might be coming at a cost as delinquencies continued their upward trajectory.

All products experienced YoY increases in delinquency rates in Q4 2019 with the exception of bank personal loans, which have now seen an improvement in YoY delinquencies in the last three consecutive quarters.

The report provides a view of the state of the consumer credit market in the latest quarter prior to the outbreak and spread of Covid-19 in South Africa.

Carmen Williams, director of research and consulting for TransUnion South Africa, said the Q4 2019 figures would provide a valuable pre-Covid-19 baseline point.

“With Covid-19 changing the economic and consumer landscape at pace, the Q4 2019 IIR provides a benchmark for the last full quarter before the impacts of the pandemic start to be felt and understood. We expect future quarters will show additional strain as the effects are realised.”

Home Loan Summary

The home loans market showed strong balance growth, driven by an increase in originations. Of concern is the overall trend in rising delinquencies, which has become more pronounced in recent quarters, said TransUnion.

Mortgage originations returned to growth in the latest quarter, up 10% YoY. In previous quarters, the category had recorded YoY declines in originations.

This latest trend reversal is driven by a number of factors, which include the continued emergence of home buyers resulting from an increased supply of more affordable housing as noted by the decline in average new account loan amounts (-3.5% YoY), TransUnion said.

Lenders have also been promoting purchase affordability by featuring deals which require smaller deposits. The trend reversal is also attributed to a more general ramping up of activity in the housing market after a slow start to 2019.

Although average home prices increased at a slower rate than inflation, they still grew, which has led to a general increase in overall mortgage balances up 7.4% YoY, marking the second quarter of steady growth, said TransUnion.

Account-level serious delinquency rates (3+ MIA) increased YoY by 90 bp to 4.6% in Q4 2019, marking the sixth consecutive quarter that home loan delinquencies have increased.

This pronounced trend requires intervention, especially as home loan lenders increase their exposure by financing a greater portion of the total price. This is of particular concern given the expected impacts foreseen as a result of the implementation of Covid-19 measures, the credit union said.


Read: Here’s how much the average personal loan is in South Africa

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The average home loan balance in South Africa