New Mortgage Lending growth follows the economy

Research and opinion on the Property Market by FNB:

4 years of economic growth stagnation, and 2 years of moderate interest rate hiking, have slowed total mortgage lending growth from a high early in 2014. The slowing growth in the FNB Estate Agent Residential Activity rating, since late 2014, points to further slowing in new mortgage lending growth in the near term.

The 3rd Quarter 2015 SARB (Reserve Bank) Quarterly Bulletin shows the value of new mortgage loans granted (Residential and Non-Residential) to have been growing at 12.4% year-on-year for the 3rd quarter as a whole.

This is mildly slower than the previous quarter’s 15.1% growth, and substantially slower than the 50.2% year-on-year high reached in the 1st quarter of 2014.

The major sub-component, Residential Mortgage Grants, was the “drag” on the growth rate in the 3rd quarter, slowing from the previous quarter’s 11.3% to 7% in the 3rd quarter of 2015.

The value of Commercial Property Loans Granted, by comparison, grew at a stronger 23.6%, but this too represents a slowdown from a 163% high reached in the 1st quarter of 2014.

Examining Mortgage Loans Granted according to a different split, i.e. on Existing Buildings vs Vacant Land and Construction, the Construction-related mortgage grants is still growing the strongest, to the tune of 33.76% year-on-year

However, this did slow from the prior quarter’s 88.6%. In addition, Vacant Land Mortgage Grants have seen growth slow for 3 consecutive quarters, from 97.2% year-on-year in the final quarter of 2014, to 5.3% by the 3rd quarter of 2015. Such slowing in Vacant Land Mortgage Grants growth may suggest a lack of growth in future planning of new development projects, which should see Construction Mortgage growth slowing further in the near term.

Existing Building Mortgage growth is normally the least cyclical of the 3. This category peaked at a far lower 40.9% year-on year growth than the other two, in the 1st quarter of 2014, but has also seen a slowdown in growth to 9.8% in the 3rd quarter of 2015.

The slower growth in new loan grants has impacted on Mortgage Payout growth since early-2014. The value of Mortgage Loan payouts for the 3rd quarter of 2015 grew by 24%, similar to the prior quarter’s 22.5%, but well down on the 52.6% year-on-year high of the 1st quarter of 2014.

Not only are the toughening economic and interest rate times being reflected in grants and payouts, but also in growth in the value of Capital Repayments, which dipped into negative growth territory in the 3rd quarter, to the tune of -0.7% year-on-year, for the 1st time since the 3rd quarter of 2013.


The slower 3rd quarter growth in New Mortgage loans comes as little surprise. Interest rates have been gradually rising since early-2014, and economic growth has been slowing for the past 4 years, and these forces must ultimately have an influence. The Overall Mortgage Market is dominated by Residential Property. The FNB Estate Agent Survey Activity rating can thus be used as a usefully leading indicator for new mortgage lending growth.

The smoothed version of this Residential Activity Indicator has been pointing towards slower growth since the final quarter of 2014. The time lag between peaks in growth in the Residential Activity Indicator and that of New Residential Mortgage Loans Granted is usually between 2-4 quarters. The timing of the slower 3rd quarter New Residential Mortgage Grants growth is thus more or less to be expected, and it appears that the 2nd quarter of this year represented a “mini-peak” in New Mortgage Lending, 3 quarters after the last “mini-peak” in Activity growth.

The shift in more recent quarters to year-on-year decline in the Residential Activity Rating points to further near term weakening in New Mortgage Lending growth.

Read more here: Mortgage Barometer_SARB_Q3_Mortgage_Data_11_Dec_2015