The continued rise in home loan applications since lockdown restrictions were eased at the start of June suggests that a modest market recovery is underway, especially at the lower end of the market.
Says Carl Coetzee, Chief Executive of BetterBond: “The bulk of the home loan applications in June so far, (78%) have been below R1.5 million, suggesting that much of the market activity is from first-time buyers taking advantage of the favourable lending conditions to gain a foothold in the property market.
In fact, first-time buyers accounted for 70% of all applications submitted for June to date.
This shows that first-time buyers are seeing the low interest rate as an ideal opportunity to invest in property,
says Coetzee. It could also be buyers looking to downscale during challenging economic times.
The mid-month statistics for June suggest that the current uptick in home loan applications will continue into July, adds Coetzee. “We saw application volumes increase in the first few weeks of June, as property transactions were able to resume, and now it looks as if this trend is set to continue. The number of home loan applications has tripled since May; the figures are now in line with levels seen before the pandemic.
BetterBond’s application statistics for the first week of June showed a decrease of only 2% compared with the equivalent period last year. By the week ending 21 June, the number of loan applications had increased by a significant 64% compared with 2019.
A monthly overview shows that the volume of loan applications is steadily increasing, with 30% more in June (to date) than in 2019. “If this continues into July, it will have a positive impact on consumer confidence, which in turn will encourage further activity in the market,” says Coetzee. “We are particularly pleased that this positive activity is evident across the country, and that overall the business is at 90% of its annual pre-Covid target,” says Coetzee.
While the pent-up demand caused by the market slowdown during lockdown may be a factor in the increased number of home loan applications, Coetzee says the record-low interest rate is certainly stimulating interest in property as a viable investment option, especially at the lower end of the market where affordability is often an obstacle.
Furthermore, the average bank approval rate for bonds is at 75%, only slightly down from previous months and above the rate of 68% seen in 2018, adds Coetzee. Also, by pre-approving through BetterBond, the chance of approval increases to 90%.
Notwithstanding the current economic challenges, the banks clearly still have an appetite to lend, as the bond approval rate indicates, says Coetzee. The current applications also reflect realistic buyers - their applications for home loans are succeeding in large numbers because the applicants are looking for bond amounts that they can comfortably afford.