BOND HOLDERS DIG DEEP

Many homeowners are struggling to afford their bond repayments in the tough economic climate

IT IS no secret that most South Africans are under severe financial pressure.

Many homeowners are giving up homes, or fighting to retain them for as long as they can, while struggling to make ends meet.

For many their home is their security so having it sold by the bank, or having to sell it themselves for financial reasons is heartbreaking.

But this is the reality for many, and banks are stretching themselves to help struggling homeowners as much as possible. Despite this, more people are defaulting on their home loan repayments, says Mfundo Mabaso, growth head at FNB Home Loans.

“There are more clients in arrears in March 2019 than in March 2018. To counter this, we have increased the arrangement terms and are assisting customers, which has improved payment behaviour.”

But many homeowners at the lower end of the market – which is most impacted by economic changes such as the rising petrol price, rates increases and inflation – tend to default without informing the bank.

“When they are contacted they tend to be evasive.”

However, a small percentage – about 1% – of this market does proactively approach the bank when in financial trouble, Mabaso says.

Customers in the “easy” and “gold” segments have been impacted by the overall increases in the cost of living in recent months.

More homeowners are looking to sell their homes before defaulting, says Tania Smit, manager of escalations and assisted sales at Pam Golding Properties.

“In bank assisted sales we are seeing a substantial increase in reverse leads and client enrolments from our side. There is definitely an increase in clients requiring assistance from the bank to sell their properties in time.”

While Absa Bank has not seen an increase in customer defaults, says Mbuyiselo Khumalo, head of Absa’s home loan collections and deceased and insolvent estates, it is witnessing “a number” of customers approaching it for assistance before defaulting.

“We also have pro-active measures to identify and assist customers who show signs of financial distress, this being irrespective of whether or not the customer has missed a payment.”

Khumalo says there has also been a “marginal decrease” in the volume of home loan applications received, reflecting general market trends over the past year.

This is echoed by Mabaso: “We have seen about an 8% reduction in applications processed compared to the same time last year, and this can be attributed to pressures faced by customers in this economic climate.”

Despite the decline, both Absa and FNB are seeing an increase in approval rates applications received.

The main reasons applications are declined are insufficient cash flow or affordability, and poor credit profiles.

The Re/Max National Housing Report for the first quarter of this year cites Lightstone Property data which reveals a total of 39 836 bond registrations was recorded at the Deeds Office over this period, totaling R43.88 million.

This translates to a 5.7% decrease in the number of bonds registered since the last quarter of 2018.

PRESSURISED Households across the country are increasingly coming under financial stress, with some being forced to give up their homes.