Home loan applications drown­ing in NCA red tape

Weekend Argus (Saturday Edition) - - PROPERTY -

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.”

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