Mortgage loans could see a surge

WITH interest rates remaining relatively stable, homes bought in the last quarter of 2023 showed a slight decline, but with the rate of decline diminishing.

However, from a previous quarter’s negative rate of -13.7% year-onyear, the value of new mortgage loans granted recorded a far smaller, and virtually insignificant, magnitude of year-on-year decline to the tune of -1.71% in the fourth quarter of 2023.

First National Bank said this diminished rate of year-on-year decline should perhaps not be surprising, given that the South African Reserve Bank (SARB) stopped hiking interest rates in May last year, and has kept rates unchanged ever since.

“That change in interest rate direction should ultimately lead to some stabilisation in a previously weakening new mortgage market, and this appears to be what we were seeing late in 2023.

“The large residential mortgage segment is normally the key influence on the direction of the value of total new mortgage loans granted due to its sheer relative size.”

And indeed, the growth in value of new residential mortgage loans granted continued to decline by -10.16% year-on-year in the fourth quarter of 2023. However, this was a significantly diminished rate from the prior quarter’s -22.84%.

The value of new commercial mortgage loans granted, however, was perhaps surprising, having shown significantly positive year-on-year growth for the final three quarters of 2023.

“This category recorded a 26.49% positive year-on-year growth rate in the fourth quarter of 2023, after the previous quarter’s 21.23% rate.

“And indeed, in a separate analysis of deeds data, commercial bond registrations in our higher volume ‘less than R100m’ market segment that we track closely saw registrations growth picking up in the latter half of 2023, to record a stronger growth year in 2023 than 2022 as a whole.”

The SARB data suggests a stronger commercial mortgage lending growth year in 2023 than in 2022, despite higher average interest rates in 2023, and weaker economic growth rate.