Mortgage Barometer – New Mortgage Lending

First Quarter 2016 SARB New Mortgage Lending data, released in the latest SARB Quarterly Bulletin, showed a return to positive year-on-year growth after four previous consecutive quarters of decline. This comes after the FNB Estate Agent Survey had pointed to mild increases in residential activity during the final quarter of 2016 and first quarter of 2017, and it is residential mortgages which have driven this return to mildly positive growth in value of new mortgage loans granted.

The June 2017 SARB (Reserve Bank) Quarterly Bulletin showed the value of new mortgage loans granted (Residential, Commercial and Farms) to have returned to mildly positive year-on-year growth, after four prior quarters of decline. The year-on-year growth rate measured 6.49%, up from the previous quarter’s -7.1% decline.

This rate remains moderate by the standards of new mortgage loans granted, and remains far below the 50.2% year-on-year growth multi-year high reached in the first quarter of 2014.

The Residential sub-component was the key contributor to the return to positive year-on-year growth of 8.8% in the first quarter. This is up from its -previous quarter’s -10.9% year-on-year decline.

For the Residential Mortgage Lending Sector, the return to positive growth follows on four prior consecutive quarters of decline.

By comparison, the Commercial Mortgage category has seen its growth being far more stable in recent quarters, not moving too far from the zero level. In the first quarter, the value of Commercial Mortgage Loans granted rose year-on-year by a slight +1.4% after a prior quarter’s slight decline of -2.1%.

The Residential Mortgage Market is arguably the more “leading sector” within the overall mortgage market, with Home Loans applicants responding swiftly to any economic or interest rate changes. The first quarter 2017 return to positive growth was much in line with the return to positive growth in the SARB Leading Business Cycle Indicator from late in 2016, which pointed towards a near term recovery in economic growth.

While some may think this is seemingly contradictory with the actual economic numbers that showed a “technical recession” in the 2016/17 summer quarters, real economic growth actually did accelerate on a year-on-year basis in the first quarter of 2017, from 0.7% previous to 1% (It was the quarter-on-quarter growth rate that was in contraction in the two summer quarters).

In the two summer 2016/17 quarters, the FNB Estate Agent Survey’s Residential Activity Rating had also pointed to some mild strengthening, and this is usually a leading indicator of the direction in the new residential mortgage lending market.

FNB utilizes this Residential Activity Rating as a “leading indicator”, with its smoothed year-on-year growth troughs leading new mortgage lending growth peaks by as much as three to five quarters.

Its smoothed rate of change has been in decline for nine consecutive quarters up to the second quarter of 2017. However, from the third quarter of 2016, FNB have been witnessing a diminishing in this rate of decline, which with a lag would suggest a trend change in the year-on-year rate of change in new residential mortgage advances, either towards diminishing rates of decline or even into mildly positive growth territory. And so we have the latter.

Examining Mortgage Loans Granted “by application”, i.e. on Existing Buildings vs Vacant Land and Construction,FNB sees all three categories shifted into positive territory in the first quarter.

The largest growth was in the value of Mortgage Loans Granted on Vacant Land, whose value grew by 16.4% year-on-year. This category is however small and volatile, and FNB are not convinced that it shows any sustainable strength in the Vacant Land market.

Of the two major categories, it was the New Loans Granted on Existing Buildings that showed the highest growth in value to the tune of +7%, while Mortgage Loans Granted for Construction remained in the doldrums with only slightly positive growth of +0.8%.

The weak growth in loans granted for Construction points to a weak 2017 on the building activity front. FNB expects that this would be especially so in the case of Non-Residential Building activity, where weak economic growth is expected to cause vacancy rates in existing buildings to rise.

New Loans Paid Out, too, have moved back into positive territory in the first quarter, to the tune of 12.4% year-on-year. This follows on a previous quarter’s -9.2% decline.

The apparent faster growth in bonded property transaction activity levels recently (as reflected in positive growth in value of new mortgage loans granted) has also impacted on Capital Repayments growth. The value of Capital Repayments for the first quarter of 2017 shot up to 36.1% year-on-year.

This rise in capital repayments growth is largely explained by a faster rate of properties being bought and sold, which raises the rate of loan settlement on selling.


The first quarter 2017 rate of increase in new mortgage loans granted represents the first quarter of positive year-on-year growth after four prior quarters of decline. Certain economic, and FNB’s own leading property, indicators had begun to suggest that some turnaround back into positive growth territory would emerge at a stage of 2017. The SARB Leading Business Cycle Indicator, very often a useful leading indicator of new mortgage lending growth to come, along with FNB’s smoothed Residential Activity Rating rate of change, had both pointed towards mild near-term improvement in new lending.

However, a sustained positive trend from here onward is by no means guaranteed. More recently, FNB’s panel of estate agents surveyed has begun report a sharp increase in negative sentiment in the residential market, while a renewed decline in the RMBBER Business Confidence Index in the 2nd quarter suggests that the Non-Residential Mortgage Sector could also see renewed pressures. The perceived second quarter deterioration in sentiment in the residential market, along with a renewed quarter-on-quarter decline in Activity (after two prior quarters of rise) may have to do with widely publicized news around the certain of the country’s credit rating downgrades to “junk status”, along with the more recent negative news of a “technical recession”.

Read more here: Mortgage Barometer – SARB Q1 2017 Mortgage Data – 20th of June 2017