Home loan lenders are taking a more prudent approach

HOME loan lenders have adopted a slightly more cautious lending approach, according to mortgage originator ooba.

Rhys Dyer, the chief executive of ooba, said yesterday that evidence of this was the 5.5 percent year-on-year increase in the average deposit as a percentage of purchase price in the fourth quarter of last year.

ooba said the average deposit as a percentage of the purchase price increased to 17.4 percent or R201 573 in the fourth quarter, compared to 16.5 percent or R178 650 in the third quarter.

FNB said yesterday that there had been an uptick in the still small percentage of 105 percent to 109 percent loan to purchase price bonds, with 100 percent and above loan to purchase price mortgage bonds forming “a significant 42.9 percent of total bonds”.

But John Loos, a household and property sector strategist at FNB, said mortgage lenders as a group remained conservative on loan to purchase price ratios compared to the pre-2008 property boom.

Loos said the average loan to purchase price ratio rose slightly to 88.5 percent in the fourth quarter of last year from 87.9 percent in the previous quarter, but stressed that conclusions could not be drawn about a rising trend in loan to purchase price ratios following an increase in only a single quarter.

He said the broad trend in average loan to purchase price ratios had been downwards since the 90.1 percent multiyear high reached in the second quarter of 2012 and was still well down on the boom-time high of 96.6 percent reached in the fourth quarter of 2007.

While there was an upward movement in the 105 percent to 109 percent loan to purchase price group of bonds, this group was still small and made up only 4.7 percent of the total.

But Loos said this percentage had risen noticeably from Many economists forecast increased personal taxes and increased taxes on consumer goods to be announced.

2.9 percent of total bonds registered at the beginning of last year.

“It would seem therefore that there may be a move towards a greater portion of bonds being registered at loan to purchase price ratios above 100 percent and even above 105 percent, although this group remains a small share of the total market,” he added.

Loos said 42.9 percent of loan to purchase price loans were at 100 percent and above in the fourth quarter of last year, which remained far lower than the 65 percent reached in the second quarter of 2007 at the back end of the last decade’s property bubble. He said this pointed to moderate risk-taking by mortgage lenders as a group.

ooba said bond approval rates declined by 2.7 percentage points year-on-year in the fourth quarter of last year to 53.1 percent from 55.8 percent in the fourth quarter in 2015.

Dyer said this illustrated consumer affordability pressure.

He added that 2017 looked to be a challenging year for the South African property market, with quarterly statistics pointing to ongoing affordability constraints for South African consumers.

With the Budget speech “just around the corner”, South Africa was battling to restore economic growth rates and to balance the books.

Against this backdrop, there could be tax hikes in the 2017 Budget to help plug the fiscal gap. “This will put further spending pressure on consumers, especially those who are looking to buy property this year,” he said.