Late mortgage payments double as SA borrowers crack

TransUnion credit bureau analysis shows arrears of R42bn on home loans

In another sign of the dire state of the economy and the toll it is taking on households’ finances, data from one of SA’s biggest credit bureaus for the second quarter shows consumers are struggling to meet monthly repayments on a wide swathe of credit products.

TransUnion analysed data from 23-million active consumers on its database which showed that those who have missed three or more payments on their home loans more than doubled from 3.7% in the second quarter of 2019 to 7.8% in the second quarter of 2020.

Looked at in terms of value, the outstanding balances on mortgages amount to R988bn nationally, of which 4.3% are delinquent, according to TransUnion. This equates to debt of about R42.4bn.

“Home loans are generally considered lower-risk products, so it is concerning how quickly delinquencies have increased and shows that consumers at the lower end of the risk spectrum are taking strain too,” says Carmen Williams, director for research and consulting for TransUnion SA.

The figures do not include consumers who opted to take instalment relief packages from the lenders, implying that the true picture of delinquencies will only become evident in the third quarter when many of the payment breaks offered come to an end.

TransUnion’s data came on the same day as Stats SA data showed 2.2-million people lost their jobs in the second quarter, straining the ability to make their monthly repayments on everything from credit cards, car loans and mortgages.

The country’s four largest banks recently set aside R13.66bn in forward-looking provisions for bad debts that are expected to materialise in the second half of the year, which is still expected to be tough on consumer finances as banks roll back payment relief packages and the government ends its salary protection programme, or TERS. Nonbank personal loans increased by a larger nominal figure, with delinquencies increasing by 440 basis points to 32.1% relative to the same period a year ago, indicating that nearly one in three people are behind on repayments for personal loans from nonbank credit providers.

“Nonbank personal loans tend to be concentrated towards higher-risk borrowers who could be more susceptible to economic shocks such as a reduction in wages and unemployment. The increase is substantial and indicates that consumers are feeling the pinch,” says Williams.

Also clear from the data is the sharp reduction in demand for credit, as is evidenced by the number of inquiries made by credit providers in the second quarter. Registered credit providers have to perform due diligence before extending loans, and in doing so, request information from credit bureaus which register as inquiries.

Demand for unsecured loans fell the sharpest, with inquiries down 62% for credit cards and 47% for bank personal loans vs the same period a year ago. Demand for home loans remained buoyant, with an 11% rise in requests for information.

“This speaks to the decline in consumer confidence and concerns about job security and consumers’ concerns about their ability to service debt in the future,” says Williams.

The lowest interest rates in a generation have aided affordability for properties, and together with what Williams terms “pent-up demand” as a result of deeds offices being closed during April and May, this means that the figures may have been temporarily buoyed.

Registered credit providers have to perform due diligence before extending loans, and in doing so, request information from credit bureaus