100% home loans are booming - here's who can apply

Business Insider SA
  • There has been an increase in applications for 100% home loans, and more are getting approved.
  • With interest rates at its lowest level in almost 47 years and house prices under pressure, some first-time buyers are grasping the opportunity. 
  • FNB says that if you have a solid credit record, and buying a house below R2 million, you should get a 100% bond.
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This week, interest rates were cut to its lowest level in almost half a century.

For first-time home buyers – and those still left with an income amid the coronavirus crisis – the time could be ripe for a climb up the property ladder.

“The latest repo rate cut means the prime lending rate for consumers drops to 7%, which is unprecedented in our time. It effectively means a monthly repayment of less than R7 800 a month on bond of R1 million, which makes the move from renting to owning a no-brainer,” says Lew Geffen Sotheby’s International Realty CEO Yael Geffen.

The prime rate has been above 25% as recently as in the late-1990s.

South Africa's prime rate since the 1950s. Soure: TradingEconomics, SA Reserve Bank

Apart from historically low interest rates, house prices are under pressure, with some estimates that average prices could fall by more than 8% this year.

There is no transfer duty on properties selling for up to R1 million. Also – you may not need a deposit.  

According to data from the bond originator ooba, it saw an almost 68% increase in applications for 100% bonds in June. Almost 80% of those were approved.

READ | Interest rates are almost at a 47-year low - should you fix your home loan rate?

Of the big banks, FNB and Absa confirmed to Business Insider SA that they are extending 100% home loans. 

Geoff Lee, managing executive of home loans at Absa, says the bank has seen an increase in the number of home loan applications as well as an improvement in the “quality” of the applicants in June, compared to previous months.

FNB’s Mfundo Mabaso, FNB Home Finance Growth Head, says 100% lending "plus costs" is a large portion of its business.

“With the reduction of interest rates over the last six months, clients’ cashflows have improved resulting in more clients being able to afford the quantum of the mortgage they require.”

Who will get a 100% home loan

To qualify for a 100% bond, most importantly, you need a solid credit record. You have to show you have managed to keep your repayments on your credit agreements up to date, says Mabaso.

“Should clients have an acceptable credit record with no missed repayments and be purchasing a home below R2m, it is highly probable that they can qualify for a 100% bond."

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