Bad news for home loans in South Africa

 ·20 Nov 2022

Recent data from MyProperty shows that most South Africans are currently getting higher interest rates for their home loans.

The group’s most recent Home Loan Report for October 2022 showed that while the average interest rate is still below prime – currently sitting at prime minus 0.6% – it is on an upward trajectory.

According to MyProperty, the average interest rate has been trending upward over the last three months, increasing from an average of 8.86% in August (prime minus 0.14%) to 9.15% in October.

However, the rate is still a ways off from October 2021, when the average rate was sitting at 10.7% (prime plus 3.7%).

Rate October 2021 August 2022 September 2022 October 2022
Prime 7.00% 9.00% 9.75% 9.75%
Plus/Minus +3.70% -0.14% -0.80% -0.60%
Average 10.70% 8.86% 8.95% 9.15%

First-time buyers constitute the demographic that makes up the vast quantity of bond applicants, with 72% of all bond applicants looking to purchase their first property.

Gerhard Kotzé, a managing director of RealNet, reported that despite aggressive rate hiking by the South African Reserve Bank since last year, November demand for new housing keeps rising alongside deposit percentages.

Kotzé said that there are nowadays far fewer 100% loans being granted, and rates have also risen. “The average deposit requirement has risen too, to around 10% of the purchase price,” he added.

MyProperty reported the average purchase price of a home in October of this year to be R1,172,757 for all buyers, while first-timers opted for a slightly less R1,052,759.

When compared to the year before, there seem to be fewer people who are relying on bonds from their own bank that they often do transactions with or have savings accounts. Only 21% of bonds are taken up with people’s own banks – a decrease of 5% from 2021’s 21%.

The majority of applicants for home loans were people aged just below 40 years old. For first-time buyers, the average applicant was 37, while the average age of all applicants overall was 38.

First-time home-buying market

The benefits of owning a house or flat far outweigh renting, says Samuel Seeff, the chairman of the Seef Property Group.

Seeff said that if you are financially secure enough and can sustain the mortgage loan repayment – it is best to invest in your own place. Some pros include the fact that you are investing in a fixed asset that can increase in value over time rather than be a rental expense.

He added that mortgage repayment is often subject to interest rate fluctuation but will remain static, while rental rates tend to rise annually.

CEO of property firm Ooba, Rhys Dyer, reported that first-time buyers could look to the coast for cheaper properties. Dyer said that Gauteng is home to the largest percentage of potential first-time buyers at 20.3%, while the Eastern Cape is the lowest.

Regional house price inflation for the year to date can be broken down into the following, said Dyer:

  • Gauteng South and East: +7.3%
  • Eastern Cape: +5.7%
  • Gauteng North and West: +1.8%
  • KwaZulu Natal: +1.4%
  • Western Cape: -2.1%

International property company Chas Everitt provided the following tips to better your chances of succeeding in acquiring a loan:

  • Make sure you have your debt under control
  • Ensure that you have enough cash to pay a 10% deposit
  • Make sure you have a good track record of debt repayment
  • Those applying with you, such as a partner, must also have a clean credit record
  • Show that you have a stable employment history
  • The value of the property must match as security to the loan
  • Try not to get rejected for a loan before applying for another

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