Buying a house in SA just got harder as banks raise deposit requirements
BusinessTech.co.za - Jun 23rd 2016, 08:48
While the slowing economy has not as yet caused a decline in the percentage of home loans applications being approved by the banks, they have begun to raise deposit requirements in recent months.
“Our statistics show that as yet we are still securing approvals for 75% of the home loan applications we submit, and that the banks are still keen to grant home loans. However, they are applying strict affordability criteria in terms of the National Credit Act, with the result that most buyers now require a bigger percentage of the purchase price as a deposit than they did a year ago,” says Shaun Rademeyer, CEO of mortgage originator, BetterLife Home Loans.
“The main reason for this change is the steady rise in interest rates since July last year, which has pushed up the monthly repayments on all kinds of debt and, combined with rising inflation, has put many household budgets under pressure and negatively affected housing affordability.”
Average deposit required per price category
# Purchase price Av deposit 12-months maximum % of purchase price
1 R0 – R250,000 R17,205 –
2 R250,000 – R500,000 R30,638 12.3%
3 R500,000 – R1 million R93,371 18.7%
4 R1 million – R1.5 million R222,353 22.2%
5 R1.5 million – R2.5 million R432,277 28.8%
After paying all their monthly bills, many households just don’t have enough disposable income left to comfortably afford a bond repayment.
In such circumstances, the banks have no choice but to restrict the size of loans they make – with the result that prospective buyers must either purchase less expensive properties or put down bigger deposits, the mortgage originator said.
“Indeed, as the table shows, there is a ‘sliding scale’ of deposit payments according to property price, with buyers who fall into the R250,000 to R500,000 purchase price category currently paying an average of around R31,000, for example, and those who fall into the R500,000 to R1 million category paying an average of around R93,000.”
New data on new mortgage lending from the South African Reserve Bank showed a significant year-on-year decline – which is in line with numerous indicators of residential activity pointing to slowdown in the property sector.
The June 2016 SARB Quarterly Bulletin showed the value of new residential mortgage loans granted have declined by 14.57% year-on-year for the 1st quarter of 2016.
Eskom: The largest threat to the stability of the SA economy
10/09/2019 - 09:45
On Tuesday 23 July, South African Finance Minister Tito Mboweni tabled a bill before the National Assembly which would see national state-owned power utility Eskom benefit from an allocation of R59 billion over the next three years.
Innovative leasing deals boost Kenya's office market
04/09/2019 - 09:25
A creative approach to leasing deals is helping innovative landlords offset the challenges of high vacancies in an overstocked Nairobi office market, according to Broll Property Intel’s latest Kenya Office Market Snapshot H1:2019 report.
No pain, no gain for SA economy
02/09/2019 - 16:22
Despite SA’s fiscal crisis — and the fact that the country has very little to show for the loose fiscal policy run over the past decade — there is a lobby (mainly on the Left) that thinks the best way to resolve SA’s growth and fiscal challenges is to inject further fiscal stimulus into the economy.
Producer inflation slows to lowest level in five months
02/09/2019 - 10:51
Producer inflation moderated to its lowest level in five months in July, due to lower fuel prices.
Tito Mboweni issues surprise growth strategy
28/08/2019 - 09:59
On Tuesday, finance minister Tito Mboweni fired a shot across the bows of the government, publishing an economic strategy for the country on the Treasury website.