The number of home loans being approved by banks is currently growing at a faster rate than at the beginning of the year – despite the fact that the winter months are usually the slow season for home sales and bond applications.
“This may change in the wake of the interest rate increase at the end of July,” says Shaun Rademeyer, CEO of SA’s biggest mortgage originator, BetterLife Home Loans, “but our statistics show that the year-on-year increase in the number of loans being approved has risen from a steady 1% in the first few months of 2015 to 2% in the past two months.”
The faster rate of growth, he says, follows continued increases in the number of home loan applications being submitted by prospective homebuyers, and continued decreases in the number of applications being declined by the banks.
The BetterLife Home Loans statistics, which represent 25% of all residential mortgage bonds being registered in the Deeds Office, show a year-on-year increase of 3,2% at the end of July in the number of home loan applications being submitted. The number of applications being declined by the banks fell by 11,7%, following a 15,6% drop in the previous 12 months.
“The picture this paints is of a market that is in healthy equilibrium at the moment. While maintaining strict credit qualification criteria, the banks are keen to lend now and expand their home loan books, and a bigger percentage of prospective homeowners are able to qualify for loans.”
“However it must also be said that prospective buyers still have a far greater chance of their loan being approved if they apply through a reputable mortgage originator like BetterLife Home Loans. We have a success rate of 75%, compared to the overall average approval rate now of 60%.”
Rademeyer also says that although the July rate increase and another small rate increase expected later in the year will probably dampen home price growth, they are not expected to significantly slow demand.
“As it is, both lenders and buyers have demonstrated continued confidence in real estate over the past two difficult years for the economy, and that is reflected in the fact that the average home price has risen by over 14% during this period to R953 000, and the average approved bond amount by the same percentage to R788 000.”
Over the same period, he notes, about 47% of home loan applicants were first-time buyers, and the average home price paid in this sector of the market rose by almost 8% to R648 000, while the average approved bond amount increased by 9% to R601 000.
Further analysis of the latest statistics also reveals that the upper end of the market continues to hold its own, with 28% of all home loans formally granted by the banks in the 12 months to end-July having been for more than R1-million, compared to 27% in the previous 12 months.