Rates fall opens door for first-time buyers

Decrease makes it easier to qualify for loans as home-price growth slows

WITH the slowdown in the rate of house price growth over the past year, South Africans have taken advantage of the decrease in interest rates last month, which resulted in an increase in the number of first-time buyers.

BetterLife chief executive Shaun Rademeyer said things were looking up for first-time buyers.

“The slight decrease in interest rates in July means it is easier to qualify for home loans, and there may be further decreases later this year.

“At the same time, the rate of house price growth over the past 12 months has been considerably slower than the rate of salary growth, and our statistics show that there has been a significant increase in the number of 100% home loans, the majority of which always go to first-time buyers in lower-income brackets.”

Rademeyer said BetterLife’s statistics showed that the average price in the firsttime buyer sector increased 4.3% in the 12 months to the end of July compared with 5.6% in the previous 12 months. The latest available Bankserve figures showed the rate of salary growth in the 12 months up until the end of June was 6.7%.

He said the percentage of home loans granted for 100% of the purchase price had risen from 39% to 41% in the past 12 months, and the percentage of loans granted to buyers with a 10% deposit or less rose from 8.5% to 9.5%.

“…the percentage of home loan applications submitted by first-time buyers also showed a year-on-year increase in July to 47.7%, from 46.1%, and the percentage of approvals that went to first-time buyers also improved from 38% to 39%.”

Rademeyer said political and economic upheavals of the past few months had taken a toll on the property market, with the total number of home loan applications showing a year-on-year decline of 6.2% in July and the total number of approvals dropping 5.5%.

He added prices had increased an average 2.5% over the past 12 months.

“As a result, the percentage of applications that are declined outright by the banks has fallen from 27% to 25% in the past 12 months.

The percentage of immediate approvals has risen from 33.7% to 36%,” he said.

Absa home loans analyst Jacques du Toit said recently that the value of outstanding credit balances in the South African household sector showed growth of 2.9% year-on-year to R15 billion in the first half of the year.

Du Toit said outstanding household mortgage balances increased 3.1% yearon-year to the end of June.

“Growth in household credit balances, including mortgage balances, is expected to remain relatively low up to year-end. Home loan repayment patterns, which shifted further up to mid-2017 against the backdrop of trends in household finances,are expected to continue to reflect the extent of homeowner financial pressure over the short to medium term.”