Mortgage Market Barometer

The Household Sector and Mortgage Credit growth accelerated slightly in January, but this is not expected to start a new rising trend.

• On a year-on-year basis, the growth in value of Household Sector Credit Outstanding accelerated slightly in January 2016, from 4.5% previous to 4.6%, due to a slight acceleration in Household Mortgage Credit from 4.4% previous to 4.5% in January.

• The non-mortgage area of household sector credit extension came in with slightly high growth than the Mortgage Credit component, to the tune of 4.7%, unchanged from the prior month.

• While current household-related credit growth remains mild, it is believed that it needs to be slower, given that the pace of household income growth in the currently weak economy is also likely to be sluggish. Slow credit growth is important in order to sustain the trend of recent years towards a lower Household Sector Debt-to-Disposable Income Ratio, a trend believed to have been a positive development in recent years given a high level of indebtedness.

• The new mortgage lending environment appears to be weakening, with signs of slowing activity levels in the residential market. The Leading Business Cycle Indicator for South Africa normally leads the trend in new mortgage lending growth, and this has been declining for some time. Therefore, in the near term, slowing in mortgage book with growth starting may be seen, which may contribute to slowing in total Household Sector Credit.

• Ooba and Deeds data stats point to very little in the way of any significant recent changes in banks’ credit “appetite” or lending criteria.

Read more here: Mortgage_Market_Barometer__Feb_2016