Despite declining inflation and interest rates, homeowners with bonds are still under financial strain, as evidenced by the increase in overdue home loan payments. <\/p>\n\n\n\n
This is according to research and analytics firm Eight20’s latest Credit Stress Report for the fourth quarter of 2024. <\/p>\n\n\n\n
The report noted that overdue balances remain concerningly high. Two in particular were home loan overdue balances, up 23% year-on-year, and Credit Card overdue balances, up 13% year-on-year. <\/p>\n\n\n\n
It highlighted that the outstanding balance on all loans was up 1.3% quarter-on-quarter at R2.5 trillion, with overdue balances increasing by 3% quarter-on-quarter to R200 billion. <\/p>\n\n\n\n
“These levels of growth in overdue balances are concentrated in the three wealthiest segments, suggesting that South African consumers are quite distressed. <\/p>\n\n\n\n
“Even the top end of income earners is struggling despite lower inflation and two cuts in interest rates,” said Eighty20. <\/p>\n\n\n\n
The report explained that the increase in overdue balances was primarily driven by a R1.9 billion increase (2% QoQ) in the overdue balance of unsecured loans. <\/p>\n\n\n\n
Additionally, the report noted a R1.7 billion increase (5% QoQ) in the overdue balance of credit cards and the overdue balances of VAF, which remained stable this quarter at R15.9 billion.<\/p>\n\n\n\n
The significant growth in credit card and retail loans, alongside the increase in overdue balances, suggests that consumers are still under financial pressure. <\/p>\n\n\n\n
“It suggests that consumers are extensively utilising these products to cope with financial challenges such as rising prices and stagnant wages,” the report said.<\/p>\n\n\n\n
“The data underscores a dependence on high-interest, unsecured credit products in a challenging economic environment,” it added. <\/p>\n\n\n\n
The report further revealed that the overall instalment-to-net income ratio for all South Africans is 30%. This means that almost a third of the net income of all credit-active people goes towards servicing debt. <\/p>\n\n\n\n
The ratio is highest for the Heavy Hitters, at 48% of income going to instalments, followed by the Middle Class at 38%. <\/p>\n\n\n\n
The report added that Mass Credit Market pays 19% of its income towards debt, with Comfortable Retirees paying 21%.<\/p>\n\n\n\n
Eighty20 defines Heavy hitters as the wealthiest 5% of the population, have more assets than any other segment, are mostly male, have high internet penetration and do lots of shopping. <\/p>\n\n\n\n
These income earners’ current debt load is more than seven times that of the Middle-Class Workers segment.<\/p>\n\n\n\n
Middle-class workers comprise the 4.1 million middle-income, credit-active population with families, mortgages, and frequent shopping trips.<\/p>\n\n\n\n
The Mass Credit Market comprises the employed, lower middle class, mostly female, 82% of whom have retail store accounts and 1\/5th who have credit cards.<\/p>\n\n\n\n
Eighty20 also defines Comfortable Retirees as older, high-income credit active, asset-rich ex-professionals and middle-class consumers.<\/p>\n\n\n\n
DebtBusters noted a similar trend of home loan stress in their latest report. It showed that those earning more than R35,000 a month spend 74% of their monthly take-home pay to service their debt repayments.<\/p>\n\n\n\n
Debtbuster added that the indebtedness of these income earners was predominantly due to home loans and vehicle asset finance debt.<\/p>\n\n\n\n
Adding to the concern is the country’s proposed value-added tax (VAT) hikes, which experts noted could mean homebuyers would have to pay even more.<\/p>\n\n\n\n
MyProperty Home Loans bond originator Michael-Anne Abrahams warned that potential home buyers could see significant changes in the costs of purchasing properties, especially new homes if the VAT hike happens.<\/p>\n\n\n\n
Abrahams warned that the postponed Budget\u2019s proposed tax adjustment would shift the financial landscape for new constructions, existing home transactions, and accompanying services. <\/p>\n\n\n\n
Abrahams said the VAT increase would affect all VAT-inclusive services linked to home buying, such as attorney fees, estate agent commissions, and home loan registration fees. <\/p>\n\n\n\n
\u201cAlthough the direct cost of the home may not change, buyers will feel the pinch when it comes to the associated services, all of which will see a price increase due to the VAT hike,\u201d she explained.<\/p>\n\n\n\n
She added that the cumulative effect of increased service costs can extend to homeownership’s overall affordability.\u00a0<\/p>\n\n\n\n
\u201cProspective buyers might find their budget squeezed, forcing them to qualify for smaller home loans or adjust their home buying plans,\u201d she said. <\/p>\n","protected":false},"excerpt":{"rendered":"
Eight20’s latest Credit Stress Report shows that overdue home loan accounts are on the rise in South Africa. <\/p>\n","protected":false},"author":92,"featured_media":786148,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[16894,17573,20708,853],"class_list":["post-815658","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-debt-busters","tag-eighty20","tag-homeowners","tag-south-africa"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/815658","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/92"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=815658"}],"version-history":[{"count":3,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/815658\/revisions"}],"predecessor-version":[{"id":815780,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/815658\/revisions\/815780"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/786148"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=815658"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=815658"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=815658"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}