Up to 73% of bond applications are now approved, says one large estate agency. And 100% bonds are making a comeback
- Bond approvals have risen from 47% to 60% of applications, says Rawson Property Groups.
- Banks are also more willing to consider entrepreneurs - and to extend 100% bonds.
- This is supporting first-time home buying.
Homebuyers have a much better chance of getting mortgages, says the Rawson Property Group.
In 2017, 47% of bonds were approved across the industry. “As of March 2018, those approval statistics are sitting at 60% – an extremely significant rise,” says Mark Hendricks, Regional Manager for Rawson Finance Hendricks.
Rawson’s Western, Southern and Eastern Cape region had a 73% approval rate this March.
Hendricks says that for the last year or so, there’s been a definite trend towards a more relaxed approach to property finance from the banks.
“They’ve been offering more favourable rates, are open to 100% bonds again, and have been considering applications from a far wider pool of candidates than ever before.”
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He says the banks have settled into “a comfortable middle-ground” between the overly lenient pre-National Credit Act days and the overly cautious post-NCA crack-down.
“It’s no secret that financial institutions around the world lost a lot of money on reckless or ill-advised loans in the past,” he says, “I think our South African banks possibly swung a little too far in the opposite direction when the National Credit Act kicked in. This created an environment in which lending criteria were, perhaps, excessively stringent, and made it very difficult to secure financing if you didn’t fit the ‘perfect’ financial mould.”
He says banks are much more inclined to loan to entrepreneurs and small business owners who would have struggled to get access to home loans just a few years ago.
“As long as you can prove your ability to service your loan, banks are willing to look outside the box,” he says.
This is helping to boost first-time home ownership.
In the first quarter of this year, some 17.6% of homes in SA were sold to first-time buyers, according to a FNB Estate Agent Survey. This is higher than the record low of 12% during the financial crisis in 2008/9 – but still far from the 28% reached in 2014.
Almost a third of all homes (31%) sold in the Tshwane metro area are to first-time buyers. Properties in Gauteng have grown much more affordable for first-time buyers. In the past decade, Tshwane’s house prices fell by 22.5% (after inflation), according to FNB data. Joburg prices fell by 24.1%. But Cape Town property prices continued to increase, with many areas now unaffordable to entry-level buyers.
The prime lending rate dropped from 10.25% to 10% at the end of March, which should also support the property market.
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