Market is shifting towards the middle

More than 70% of the home loans currently being granted are for amounts under R1 million, according to the latest statistics from BetterBond Home Loans, which accounts for more than 25% of all residential mortgage bonds being registered in the Deeds Office, and is South Africa’s leading mortgage origination group.

Another 26% of the loans being granted are in the R1 million to R2,5 million range, leaving only about 3% in the over R2,5 million category, says company CEO Shaun Rademeyer.

Mansion

“Indeed, despite all the attention currently being given to the increasing sales of multimillion-rand trophy homes, the real backbone of the housing market at the moment is the lower end, where every month sees many thousands of people making offers to purchase and applying for home loans.

“This is reflected in our figures, in the fact that 48% of applications are still coming from first-time buyers, whose average home purchase price is R630 000, and who are paying an average of R67 000 as a deposit.”

However, he says, there have been a few quite noticeable shifts in lending patterns over the past 12 months, in line with a gradual upward shift in property prices, and an increase in purchasing in the middle-income sector, which has more repeat buyers with equity in existing homes that they can leverage as deposits.

“For example, the proportion of bonds granted in the R250 000 to R500 000 price range has dropped by more than 16% in the past 12 months, while the proportion being granted in the R1,5 million to R2 million range has risen by 33%.

Meanwhile, Rademeyer says, it is interesting to note that despite the banks’ increased appetite for mortgage lending in the past 12 months, the percentage of loans being grated for 100% of the purchase price has declined, with the result that 61% of all borrowers are now required to pay a deposit.

“And according to our figures, the average percentage of purchase price required to pay as a deposit has been a not-insignificant 18,5% over the past 12 months – although it does vary greatly depending on the home price category and, of course, on the individual borrower’s credit profile.

“This trend is tilting things further in favour of middle-sector buyers, and we expect it to gain momentum as interest rates and household expenses continue to rise over the next 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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