The local credit scene has been under the microscope of late, and concerns are being raised about the continued appetite for credit among South Africans. But to what extent is lending returning to the market? Rudi Botha, CEO of Betterbond, says that as South Africa’s largest mortgage originator, the company has not seen any reckless lending from the banks. “When it comes to home loans, the banks are still cautious about the loan-to-value and while availability of finance may certainly be increasing, responsible lending is still the order of the day.” For example, Botha notes that in the boom times of 2005 and 2006, around 78% of all home loan applications were successful. April 2008 saw only 24% of home loan applications converted into granted bonds, a figure which has greatly improved in recent months. Botha says that currently around 45% of home loan applications are successful. Banks are also taking the buyer profile into consideration when granting bonds. In the boom times approximately 25% of all buyers were investors. These days, owner-occupiers make up more than 90% of bond applications, a clear indicator that speculation has not returned to the market. Botha says that while South Africa is recovering from the financial crisis, it doesn’t mean that home loans are going to reach the approval rates they did before. “In fact,” he says, “we are only hoping to reach a 60% approval rate within the next 12 months.” Rate concessions, he says, are also not as negotiable today as they were in the past. “Bond originators motivate a large quantity of home loan applications to the bank and negotiate the deals on the buyers’ behalf. They are therefore well placed to secure the best rate across the board,” he says. “Buyers who approach the bank directly are less likely to get the kind of deals that originators do.” It was our National Credit Act and exchange controls that prevented South Africa from feeling the worst of the global credit crunch, and so the banks are not likely to place themselves in any position of risk. “The majority of homeowners now have to have equity in the form of a deposit if they want to buy a house these days,” says Botha “as 100% home loans are very limited, and are mostly only available to first time homebuyers in the affordable market.” “This means that financial institutions take the ratio of debt to income quite seriously, and consider not only whether or not the buyer can afford the monthly bond repayments, but whether they can cover the immediate costs such as the deposit, transfer costs and legal fees as well.” Botha believes that there is currently a healthy balance in the system, and that while the banks current lending policies may inhibit a growth explosion, they will encourage the sound and steady upward trend in the market.