Home loan applications surge

There has been a dramatic increase in the number of home loan applications being made in the past few months as interest rate decreases started to filter through to the market and 100% loans became available once more.

Deon Lessing, marketing director of Betterbond, South Africa’s biggest mortgage originator, says his company has experienced a 90% increase in loan applications since September and that although this is coming off a low base, it definitely reflects increased consumer confidence and demand for property.

He says that as with investments on the stock exchange, or any investments for that matter, investments in property are bound to be cyclical with peaks and troughs. “And now property is returning as a sought-after asset class.

“The increase in activity is a big indicator of that investment interest - but there is also a growing awareness among all sorts of buyers of the fact that the market has already bottomed out and that prices are starting to rise once more, meaning that there is a limited time now to secure the best deals."

More good news is that the growth in household credit outstanding is slowing down rapidly. According to the latest FNB statistics, it dropped to 2,3% y/y in October, from 3,1% y/y in September and if this trend continues it will lead to significant progress being made in reducing the average household debt-to-disposaable income ratio, which currently stands at 76,3%.

This combined with the projected growth in disposable income next year as the economy improves should put households back on a healthier financial footing - and enable more of them to meet the strict qualification criteria for home loans.

A lower debt to income ratio will also, of course, protect existing homeowners should interest rates start to go up again next year.

Source:  Property Trader