Banking changes improve access to home ownership
Even though prices are rising, the prospect of home ownership has been brought closer for many more South Africans over the past few months, thanks to shifts in bank lending practices.
These include declining deposit requirements and increases in both the number and size of homeloans being approved, and their effects are revealed in the latest statistics from BetterBond.
These figures show that the average percentage of home purchase price required as a deposit when lenders are considering homeloan applications has dropped from a two-year high of 23.3 per cent reached in February this year, to just under 16 per cent currently.
Rudi Botha, BetterBond chairperson, says the average approved bond amount is now 8.3 per cent up year-on-year and at its highest level since July 2011.
“These two factors, combined with the low interest rates we continue to enjoy, are more than compensating at the moment for higher property prices, and are thus also bringing home ownership within reach again for many South African families.”
This is reflected in the fact that the average household income required to purchase the average home is the same now as it was 12 months ago, even though the average home price has increased by 10.9 per cent in that time.
“First-time buyers accounted for 39 per cent of all bond applications in July, of which is still some way off the 45 per cent mark reached a year ago, but a considerable improvement on the 35 per cent low recorded in March.
“And here too, the big motivator has been the banks’ decision to slash deposit requirements from an average 14.6 per cent of home purchase price in March, to just 7.9 per cent currently,” he says.
Botha adds, however, that while the banks may be on a drive now to increase secured lending such as homeloans, which are a lot less risky for them than unsecured personal loans, overdrafts and credit card balances, their credit granting criteria are still very strict.
“Potential borrowers are thus, well advised to apply through a mortgage originator, which will employ a multiple submission process to different lenders in order to give them the best chance of success,” he says.
