You need a big­ger de­posit to get a home loan

The days of home­buy­ers be­ing granted 100-per­cent bonds ap­pear to be over as banks tighten up on their lend­ing cri­te­ria. Neesa Mood­ley-Isaacs re­ports

Weekend Argus (Saturday Edition) - - PERSONALFINANCE -

The prime lend­ing rate has dropped to 10.5 per­cent, its low­est level in three years, but banks are tight­en­ing up their lend­ing cri­te­ria and you will need to put down a size­able de­posit if you want to qual­ify for a home loan. You will also have to pay the trans­fer and regis­tra­tion costs out of your own pocket.

Saul Gef­fen, the chief ex­ec­u­tive of mort­gage orig­i­na­tor ooba, says the lat­est oo­barom­e­ter (ooba’s house price in­dex) shows a trend of di­min­ish­ing av­er­age bond amounts month-on-month. In July, the size of the av­er­age ap­proved bond dropped by 7.7 per­cent to R587 222 from R636 169 in June.

“The con­tin­u­ing drop in the av­er­age bond size is a re­flec­tion of the banks’ in­creased de­posit re­quire­ments,” Gef­fen says.

Year-on-year, the av­er­age de­posit, as a per­cent­age of the pur­chase price, con­tin­ues to show a sig­nif­i­cant in­crease: it was up by 30.8 per­cent from July last year.

Ac­cord­ing to the oo­barom­e­ter, buy­ers are putting down an av­er­age de­posit of 24.2 per­cent of the pur­chase price to se­cure a bond, com­pared with 18.5 per­cent in July last year. The oo­barom­e­ter shows that, month-on-month, the re­quired de­posit has in­creased by 28 per­cent since June.

How­ever, Per­sonal Fi­nance has it on good au­thor­ity that at least one of the four big banks will be tak­ing a more favourable stance on de­posits for home loans from next month.

The cur­rent lend­ing cri­te­ria of the ma­jor banks are:

STAN­DARD BANK

Stan­dard Bank is not grant­ing 100-per­cent mort­gage bonds, re­gard­less of the prop­erty value.

For prop­er­ties val­ued up to R300 000, you can get a 95-per­cent loan. For prop­er­ties val­ued be­tween R300 000 and R2.5 mil­lion, you can get a 90-per­cent loan, and for prop­er­ties val­ued at R2.5 mil­lion and more, you can get an 80-per­cent loan.

Th­ese terms are much tighter than they were in June last year, when Stan­dard Bank an­nounced that it would grant 100-per­cent home loans for prop­er­ties val­ued up to R750 000. For prop­er­ties val­ued be­tween R750 000 and R2.5 mil­lion, you could get a 95-per­cent loan, and for prop­er­ties val­ued be­tween R2.5 mil­lion and R3 mil­lion, you could get a 90-per­cent loan.

Cur­rently, if you are pur­chas­ing va­cant land, you can get a loan of 75 per­cent if you are an ex­ist­ing Stan­dard Bank cus­tomer. If you are not a Stan­dard Bank cus­tomer, you can get a 75-per­cent loan if the land has a value of un­der R1 mil­lion and a 60-per­cent loan if the value is more than R1 mil­lion.

Last year, Stan­dard Bank sold re­pos­sessed prop­er­ties for a to­tal of R131 mil­lion (this amount was set off against the out­stand­ing debt on the prop­er­ties), which is 42 per­cent higher than the 2007 amount of R92 mil­lion.

ABSA

Absa re­quires a 15-per­cent de­posit on a home loan if you an ex­ist­ing client and a 30-per­cent de­posit if you are not an Absa client.

If you are buy­ing va­cant land, you will have to put down a 40-per­cent de­posit.

The av­er­age de­posit on an Absa home loan is 22.6 per­cent, up from an av­er­age of 14.4 per­cent last year.

Luthando Vu­tula, the manag­ing ex­ec­u­tive of Absa Home Loans, says the tighter de­posit re­quire­ments have been im­ple­mented as a re­sult of the de­clin­ing prop­erty mar­ket.

“The ex­tent of the de­posit re­quire­ments are di­rectly re­lated to the per­for­mance of the prop­erty mar­ket in the dif­fer­ent prop­erty value seg­ments and the pace with which prop­erty prices have de­clined in th­ese seg­ments,” he says.

How­ever, Vu­tula adds that if you can­not meet the de­posit re­quire­ments, the bank will ac­cept other forms of col­lat­eral, such as your re­tire­ment sav­ings.

FIRST NA­TIONAL BANK

Jan Kleyn­hans, the chief ex­ec­u­tive of First Na­tional Bank (FNB) Home Loans, says the bank is re­pos­sess­ing about 40 prop­er­ties a month, or about 480 prop­er­ties a year at a to­tal value of about R300 mil­lion.

Re­pos­ses­sions have nearly dou­bled since a year ago, he says.

“De­spite the drop in in­ter­est rates, real dis­pos­able in­come in the house­hold sec­tor is de­clin­ing, and with it the ca­pac­ity to re­li­ably ser­vice debt in the fu­ture,” he says.

If you buy a prop­erty val­ued be­low R1.5 mil­lion, you can get a loan of 95 per­cent with FNB; if you buy a prop­erty val­ued at more than R1.5 mil­lion, you can get a loan of 80 per­cent.

Kleyn­hans says FNB is of­fer­ing higher loans than other banks, as it is con­fi­dent that the cur­rent en­vi­ron­ment is a good op­por­tu­nity to at­tract “good risk” cus­tomers.

The bank has in­tro­duced a “quick sell” pro­gramme to help cus­tomers who are bat­tling to meet their bond re­pay­ments to fast-track the sale of their homes be­fore their homes are re­pos­sessed.

If you pur­chase a “quick sell” prop­erty, FNB will give you a 100-per­cent loan, which means you need cash only to pay the trans­fer and regis­tra­tion costs. For a list of the prop­er­ties avail­able, go to www.quick­sell.co.za

NED­BANK

Clive van Horen, the manag­ing ex­ec­u­tive of re­tail se­cured lend­ing at Ned­bank, says the bank of­fers 90-per­cent loans on prop­er­ties val­ued at un­der R3 mil­lion and loans of 85 per­cent on prop­er­ties val­ued at more than R3 mil­lion. (Th­ese terms ap­ply whether or not you are an ex­ist­ing Ned­bank client.)

“The vol­ume of new home loan applications has dropped by more than 50 per­cent from the first half of 2008 to 2009, sug­gest­ing that con­sumers’ con­cerns about the broader eco­nomic en­vi­ron­ment are caus­ing them to hold back on buy­ing houses,” he says.

Van Horen says the bank tight­ened its lend­ing poli­cies in the sec­ond half of last year in an­tic­i­pa­tion of the in­creased risk lev­els and higher cost of fund­ing. “We be­lieve this was the only log­i­cal re­sponse to pro­tect the bank’s cap­i­tal and de­pos­i­tors,” he says.

Ned­bank’s home loan ap­proval rate has de­clined since last year – from an av­er­age of one out of three applications to one out of four applications. Van Horen says the rate is likely to im­prove only once con­sumer in­debt­ed­ness de­clines, eco­nomic growth re­sumes, dis­cre­tionary in­comes in­crease and house prices sta­bilise.

Ned­bank of­fers 100-per­cent loans on re­pos­sessed prop­er­ties and prop­er­ties sold via the Ned­bank auc­tion pro­grammes, where dis­tressed home­own­ers can sell their prop­er­ties to avoid re­pos­ses­sion.

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