Home loan applications drowning in NCA red tape
HOME loan applications are still not being approved as readily as they should be, given banks’ public commitments to reopening the credit taps for property and this year’s cuts in interest rates.
“The property industry is waiting in vain for the much-heralded easing,” says Henry Lee of Century 21 Prime Properties.
“ Bond ap p l i c at i o n ap p r ova l s have improved and probably around 75 percent are being accepted but not to the 100 percent levels claimed by the banks, and in most cases deposits of 10 percent are still needed for bonds of more than R1 million,” he says.
“Also the lower and elite segments of the market are seemingly receiving preference, while midrange approvals are harder to obtain, which means an important segment of the market is not in the picture.”
Accepting that the banks are giving priority to clearing their repossessions backlog, the situation nonetheless raises the question of whether the National Credit Act (NCA) needs to be reconsidered, says Century 21 MD Colleen Gray.
The NCA gover ns all credit approvals including home loans, and information that must accompany applications includes income ear ned, pension and PAYE payments, medical aid premiums, rates, taxes, levies and UIF contributions.
Also required are household budget details such as domestic workers’ wages, garden services, travel costs, insurance payments and funeral policies as well as retirement annuities, timeshare commitments, monthly grocery costs, clothing expenses, communication costs, TV licences, DStv, vehicle costs, furniture and fittings and investment costs, even alimony payments.
“Finally, you have to include the market value and liabilities for fixed property and any other assets and liabilities, so purely on the grounds that all this is overly onerous, there would seem to be a case for easing,” says Gray.
“The NCA is arguably the toughest credit legislation in the Western world and even extremely creditworthy individuals by any standard have had their bond applications turned down. It’s time for a reality check.”