Would-be home buyers in all price brackets are still experiencing considerable difficulties in getting bonds, despite a much publicised easing of bank loan criteria. In general, these difficulties are encountered most seriously at the lower end of the income scale.
"Bond originators like Betterbond have indicated that in the past three months they have approved 20% more bonds than they did last year, says Derek Evans, an agent with Rawson Properties in Muizenberg, Cape Town. "However, it remains true that, while ooba and others can now claim that some 67% of bonds are being approved, which in ooba's case is a 2.5% increase on 2010, in the affordable and township housing, our experience has been that less than 40% of applicants are successful."
Bad debt
In today's market many buyers appear to qualify for a bond on paper, but are then written off by the bank on their score card for a few late payments or an old debt they knew nothing about. "We have even had cases where the purchaser had a deposit, but bad debt, and the bank suggested using the deposit to offset the debt and gave the purchaser a 100% loan."
Other bond applicants will find that although they qualify, they cannot afford the 4 or 5% extra upfront cost which has to be paid before the deal can go ahead. This makes it essential for many people to get a 104% bond, but at the moment these are given only to a very limited number of people, usually people in settled and secure jobs in which they have been employed for a long time. Statistically, bond applications have increased 20% year-on-year, with current approvals hovering at 50%
*Taken from Bizcommunity with permission from Rawson's