Be savvy when it comes to bond finance

Private Property South Africa
Engel & Volkers

A great deal of bond originators have recently released statistics showing that home loan grants have increased to 20% year on year.

This is a definite indication of the property market picking up. Even though the grants have increased, the number of applications being declined has also somewhat increased.

Bank statistics have showed that over the last few months 100% home loans have dropped significantly by 20% of all applications approved. This does put pressure on house prices and the property market in general.

“Even though Basel III has not yet come into play, you can definitely feel that banks are tightening up their lending criteria,” says Sandy Reddy, Head of Origination of EV Finance. According to Nomsa Motshegare, acting CEO of the National Credit Act (NCR), in December 2011 there was a 1.3% increase in credit-active consumers.

“As banks have tightened up their lending criteria it is important to know your credit status and be in control of it, especially when it comes to applying for a home loan. Banks are even more cautious now than what they were a few years ago. If during the last 6 months you skipped a payment on any of your accounts, for instance even on a clothing account, your chances of obtaining a 100% loan will drop to nil. A few years ago you would still have been eligible for receiving mortgage finance. In the case were you have missed a payment, you will have to wait another 6 months before you can apply for a home loan.This means the chances are that you will lose out on that home you were looking to buy and will have to settle for something less,” Sandy added.

Sandy also mentioned that people consideringbuying a property in the near future should be savvy about the lending criteria of the bank. Before you apply for a home loan you will have to ensure that you have not had any credit related issues in the last 6 months to a year. The public have become more aware of the requirements when applying for home loans and are usually prepared when they do apply.

“As the credit-active consumer count grows, so will the credit related problems. Consumers should be aware of this and should keep their appetite for borrowing limited as the banks will definitely tighten up even more.It is imperative that you keep away from unnecessary credit if you are looking toapply for a bond in the near future,” Craig Hutchison CEO of Engel & Völkers concluded.


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