Developers should be jumping for joy at the prospect of thousands of new homebuyers recently “liberated” into the market by the introduction of a State mortgage guarantee fund.
So says RealNet CEO Tjaart van der Walt, who notes: “The fund is specifically intended to give the banks more confidence about granting home loans to people earning R3500 and R9000 a month – and there are thousands of salary-earners such as policemen, teachers and nurses this bracket who have previously been shut out of the market. “However, there is a currently a limited amount of stock available that would be affordable for such buyers and that should spur developers into action. At today’s interest rates, a person earning R3500 a month, for example, could probably only afford a bond of around R108 000, and assuming he paid a 10% deposit, that would mean he could possibly buy a property costing around R118 000.”
At the upper end of this scale, the person earning R9000 a month might be able to buy a home costing around R310 000, while a couple who pooled their mid-range salaries for a total of R15 000 a month, say, could probably buy a R500 000 home, depending on what other debts they have, such as car repayments or HP instalments. “It is important to note,” says Van der Walt, “that the introduction of the mortgage guarantee fund does not override the provisions of the National Credit Act, and that banks are still going to apply the strict credit qualification criteria stipulated in this legislation, no matter what income bracket potential buyers fall into. “Nevertheless, we believe there will shortly be much more action in the inner city and township markets, and that this will stimulate new development initiatives in other areas, which will help create jobs and, in turn, even more potential homebuyers.” Meanwhile, he says, potential buyers in all income categories should be doing their utmost at this stage to save the biggest deposits possible – not so that they can afford more expensive homes but so that they can keep their bond repayments down and give themselves some budget leeway if interest rates should start to rise again. “On the other hand, we also believe that government could be doing even more to encourage home ownership, for example introducing tax-relief on bond repayments as is available in the US.”