Mortgage Barometer – new mortgage lending

4th Quarter 2016 SARB New Mortgage Lending data, released last week in the SARB Quarterly Bulletin, showed a further year-on-year drop. This is the 4th consecutive quarter of year-on-year decline, the lagged impact of a multi-year economic growth slowdown coupled with 2014 to early-2016 interest rate hiking.

The March 2017 SARB (Reserve Bank) Quarterly Bulletin showed the value of new mortgage loans granted (Residential, Commercial and Farms) to have declined by  -7.07% year-on-year for the 4th quarter of 2016.

This is slower compared with a decline of -3.6% in the previous quarter, and represents the 4th consecutive quarter of year-on-year decline.

The slowdown in growth comes all the way from a 50.2% year-on-year multi-year high reached in the 1st quarter of 2014.

The Residential sub-component was the key  “drag” on the growth rate in the 4th quarter. The value of residential mortgages granted declined by -10.9% year-on-year, while that of commercial mortgages declined by a lesser       -2.1% in the same quarter.

For the Residential Mortgage Lending Sector, the 4th quarter of 2016 was the 4th consecutive quarter of growth slowdown in the value of mortgage loans granted.

By comparison, for the Commercial Mortgage category, the 4th quarter decline comes after positive year-on-year growth of 10.3% in the previous quarter.

The Residential Market is arguably the more “leading sector”, with Home Loans applicants responding more swiftly to any economic or interest rate changes. This market has long since responded to rising interest rates since early-2014, as well as to 5 years of broad deterioration in economic growth, and slowing growth in new residential loans granted have for a while suggested that Commercial grants would soon follow that trend at a later stage.

However, the FNB Estate Agent Survey’s Residential Activity Rating has recently been pointing to the possibility that new residential mortgage growth may once again turn mildly positive at a stage later in 2017. FNB utilizes this Activity Rating as a “leading indicator”, with its smoothed year-on-year growth troughs leading new mortgage lending growth peaks by as much as 3 to 5 quarters.

After having declined year-on-year for 7 consecutive quarters, the year-on-year growth rate for the smoothed Activity Rating moved back into slightly positive territory in the 1st quarter FNB Estate Agent Survey. With some lag, therefore, improving residential market activity could translate into a return to positive growth in new residential mortgage loans granted.

Examining Mortgage Loans Granted “by application”, i.e. on Existing Buildings vs Vacant Land and Construction, we see all 3 categories were in negative territory in the 1st quarter.

The largest decline was in the value of Mortgage Loans Granted for Construction, whose value dropped by -19.62% year-on-year in the 4th quarter. Mortgage Loans Granted on Existing Buildings declined year-on-year by       -5.29%, while those on Vacant Land declined by  -1.25%.

The big decline in loans granted for Construction points to a weak 2017 on the building activity front, and FNB expects that this would be especially so in the case of Non-Residential Building activity.

New Loans Paid Out, too, have been languishing in negative growth territory for 4 consecutive quarters, declining by -7.71% year-on-year as at the 4th quarter of 2016.

The slower growth in property activity volumes recently has also impacted on Capital Repayments growth since 2014. The value of Capital Repayments for the 4th quarter of 2016 declined by -9.2% year-on-year.

This slowdown in capital repayments growth is largely explained by a slower rate of properties being bought and sold, which slows the rate of loan settlement on transacting.


The 4th quarter 2016 rate of decline in new mortgage loans granted represents the 4th consecutive quarter of year-on-year decline. However, certain economic, and FNB’s own leading property, indicators have begun to suggest that some turnaround back into positive growth territory may emerge later in 2017. The SARB Leading Business Cycle Indicator, very often a useful leading indicator of new mortgage lending growth to come, along with our smoothed Residential Activity Rating, have both turned to positive year-on-year growth recently.

However, trend changes in new mortgage lending normally only follow trend changes in these indicators with something of a lag. FNB thus remains of the belief that a return to positive growth in the value of new mortgage loans granted, as well as those paid out, is perhaps only likely in the 2nd half of 2017, with the Residential category leading the way ahead of Commercial Mortgages.

Read more here: Mortgage Barometer SARB Q4 2016 Mortgage Data 27th of March 2017