Relaxed banking criteria boosts home loan approvals

Private Property South Africa

South African banks have loosened their lending criteria which has supported a revival in the property market and helped new buyers enter the market says South Africa’s biggest mortgage originator, ooba. “For the last few months banks have continued to relax their lending policies, which is positive news for potential home buyers and the property market as a whole,” says Saul Geffen, chief executive of ooba. Banks, across the board, have relaxed their loan-to-value (LTV) requirements. This is a strong signal that the banks’ appetite to lend has changed for the good, and that the banks’ view is now for the recovery of the property market and of house prices. Three of the four big banks are now offering 100% loans with one of them offering 95% that has opened the financing taps for homebuyers. “This means that banks will approve the full value of the property without requiring large deposits which became the norm since last July,” states Geffen. “It is also positive for home owners who have been trying to sell as improved affordability of potential buyers, boosted by improved access to credit, will support a recovery in the property market.” The latest data from the September oobarometer shows that the average deposit required is far more affordable at 12.5%. This is a significant improvement since July this year where deposits required were up to a high of 24.2%. The decrease in deposits over the last few months will reduce the barriers to entry for purchasing a property. “Those who tried to apply for loans earlier this year and were rejected because they didn’t have the required deposit should try again,” suggests Geffen. “With the relaxation of lending policies there should be a much higher chance now of being approved for a loan on favourable terms.” Another positive trend for consumers is that banks have become more competitive on interest rate concessions. For the first time since early 2008 banks with generally more relaxed credit criteria are losing out to banks with better rate concessions. “More competition amongst banks for non-bank customers means that potential home buyers who have not been approved for a loan by one bank, are likely to have success with another bank,” says Geffen. ooba has seen a 21% surge in approved bonds from August to September and expects a further 18% increase for October. If the 18% increase in October is achieved, ooba will have experienced an 84% growth in the value of approved loans since April this year. Geffen recommends that consumers looking for the best deal on home loans should make use of a mortgage originator. “Originators have the ability to speedily shop around for the best deal and offer independent advice, all at no cost or obligation,” concludes Geffen.

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