Steep rise in value of home loan approvals

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The latest statistics released by BetterBond Home Loans, SA’s biggest mortgage origination group, show just how much the residential property market has strengthened over the past year.

The total value of home loan applications submitted by the group, for example, increased by more than R2 billion (or 9,5%) in the 12 months to end-January, to a total of R23,6 billion.

The total value of bonds for which the group was able to obtain approval during the period rose even more steeply (by 17,8%) to R19 billion – which included R9,7 billion worth of applications that it was able to ‘rescue’ and see through to approval after they were initially declined.

The average approved bond size in the 12 months to end-January was R781 087, compared to R715 240 in the previous 12 months.

The increase in the value of bonds approved, says BetterBond CEO Shaun Rademeyer, was partly due to a year-on-year increase in the average home purchase price from R876 248 to R952 579, but also to an increase in the actual number of applications.

“In addition, a better quality of applications from potential borrowers and an increased appetite for long-term lending on the part of the banks resulted in a 13,5% drop in the average number of applications that received an initial decline from the banks – and helped to bring about an 8,7% increase in our average monthly bond approval ratio.”

The quality of the applications was better, he says, because potential borrowers were generally in much better financial shape in 2013 than in 2012, having worked hard to reduce their debts and increase the amount of disposable income they had available to cover their monthly bond repayments.

“There also appeared to be much wider acceptance of the need to pay a deposit – and of the advisability of doing so, not only in order to increase the chances of qualifying for a home loan, but also so as to create some repayment leeway should interest rates start to rise as they have recently just done.”

Simultaneously, Rademeyer says, the average percentage of purchase price required by the lenders as a deposit fell from 20,45% in the year to end-Jan 2012 to 18,98% in the 12 months to end-Jan 2014, so the actual average deposit required actually rose very little, despite the increase in house prices.

With regard to first-time buyers, he says there was a slight increase in the bank’s willingness to grant bonds for 100% of the purchase price of a property, and that home-buying in this sector has also been facilitated by somewhat slower growth in home prices at the lower end of the market.

“In addition, the average percentage of the purchase price required as a deposit by first-time buyers also showed a substantial year-on-year decline from 12,4% to 10,6%, which actually equated to a R6000 drop in real terms.”

BetterBond’s statistics show that the average approved bond size for first-time buyers in the past 12 months was R622 384, compared to R579 933 in the previous 12 months.

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About BetterLife Home Loans

Since 2003 BetterLife Home Loans has been SA’s No.1 Bond Originator, handling the entire home loan application process on your behalf – free of charge! Our aim is still to source the best interest rate for you by submitting your home loan application to all the major banks. There is no easier way to apply for a Bond or Home Loan in South Africa!

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