On the mend

In­come ris­ing faster than credit

Finweek English Edition - - Economic Trends & Analysis - GRETA STEYN gre­tas@fin­week.co.za

ONE OF THE REA­SONS why the res­i­den­tial prop­erty mar­ket has been un­der pres­sure has been the prob­lems posed by house­hold fi­nances. But First Na­tional Bank home loans strate­gist John Loos says in­di­ca­tions are that an im­prove­ment in house­hold sec­tor credit qual­ity and a de­cline in mort­gage de­fault rates may not be far off.

Loos says the low rate of growth in house­hold credit was ex­ceeded by the rate of growth in nom­i­nal house­hold dis­pos­able in­come in first quar­ter 2009. He says fig­ures show to­tal labour re­mu­ner­a­tion recorded an 8,9% year-on-year growth rate in that quar­ter. There’s been a de­clin­ing trend in the monthly data for to­tal house­hold sec­tor credit out­stand­ing, where the year-on-year growth rate de­clined to only 5,9% in April. Loos says those fig­ures sug­gest a fur­ther de­cline in the house­hold debt-to-dis­pos­able in­come ra­tio.

A de­clin­ing debt-to-dis­pos­able in­come ra­tio – along with re­cent fall­ing in­ter­est rates – means the house­hold debt-ser­vice ra­tio is on its way to lower lev­els.

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