While it may be an exaggeration to state that banks are going all out to help first-time buyers, they are certainly granting more leeway to those who are entering the property market for the first time.
If the latest stats are anything to go by, first-time buyers are still finding it easier to get a 100 percent bond from the banks and perhaps more encouragingly, are spending more on their first homes.
In a recent article we discussed how a growing number of first-time buyers were seemingly having a much easier time of things and were not only having their bond finance granted, but were also receiving most of the 100 percent approved bonds. This trend is continuing and according to Betterbond’s statistics, even those first-time buyers who do not qualify for a 100 percent bond are being asked to put down smaller deposits.
Rudi Botha, CEO of BetterBond, says that the residential property market has reached a stage that occurs only very rarely in which several major factors are aligned in favour of first-time buyers.
“For a start, despite the fact that the average home purchase price among first-time buyers has climbed steadily from R582 000 to R621 000 in the past four months - and is currently also five percent higher than at this time last year - home ownership has actually become more affordable, thanks to the easing of credit restrictions and of course, an interest rate cut.”
At the moment, about four out of every 10 home loans approved are 100 percent loans and most of these are going to first-time buyers, including those in the affordable sector.
“In addition,” says Botha, “the average percentage deposit required by first-time buyers who don’t manage to secure a 100 percent loan has declined from 11,5 percent of the purchase price to 9 percent. So effectively, the average deposit amount for such buyers has fallen to around R56 000, compared to R71 000 earlier this year, even though home prices are higher.”
For a start, that relief is now combined with lower home loan interest rates since the Reserve Bank cut the repo rate by 0,5 percentage points in July, further increasing affordability levels for first-time buyers.
“For example, at the current ‘standard’ home loan interest rate of 8,5 percent, the minimum monthly repayment on a bondof R621 000 (assuming a 100 percent loan has been secured) is R5 389, compared to R5 587 at an interest rate of 9 percent. And lower rates do of course make it easier for prospective buyers to qualify for loans in the first place.”
These developments have certainly piqued the interest of those looking to invest for the first time and this is reflected in the stats. First-time buyers accounted for 42 percent of all bond applications in July, compared to 37 percent four months ago. The percentage of bonds being granted to first-time buyers has also risen from 35 percent to 39 percent during the same period.
The property experts have been urging people to invest in property for some time and, by all accounts, now is the ideal time for first-time buyers to take the plunge and climb onto the proverbial property ladder. Interest rates will certainly not remain this low forever. While there may be those who fear the inevitable rise, it pays to remember that generally speaking, most first-time property owners find the financial burden somewhat tougher during the first couple of years of property ownership and if the interest rate is lower, then obviously so are the financial obligations.