Banks more willing to lend a positive sign for home buyers and sellers

Banks are showing an increased appetite to lend, according to first quarter (Q1 2018) property statistics recently released by ooba, South Africa’s leading home loan originator.

Rhys Dyer, CEO of ooba, says, in Q1 2018 ooba recorded the highest home loan approval rate in the over ten years since the National Credit Act was implemented. The total ooba approval rate of 76.9% showed an increase of 4.9% over the Q1 2017 approval rate.

Consumers appear to be managing their debt much better and the current low-interest-rate lending environment, coupled with slower growth in property prices means getting a bond for your home is a great deal more affordable now than it was 12 months ago.

A further benefit for consumers of stronger competition amongst banks to lend, is the cheaper access to credit. This is evidenced in the average interest rate ooba achieved for its customers, which improved significantly from 0.35% above prime in Q1 2017 to 0.16% above prime in Q1 2018.

“Banks are increasingly willing to lend the full value of a property without requiring a deposit,” says Dyer, and this trend can already be seen in ooba’s quarterly statistics. For Q1 2018, the average deposit for first-time buyers as a percentage of purchase price was 12.5% compared to 14% in Q1 2017. The average deposit over the entire market also declined by 6.4% year-on-year.

“Although it’s technically a buyers’ market, these trends are also positive for homeowners struggling to sell their properties as it increases the pool of potential properties buyers can afford,” adds Dyer.

Statistics from ooba show the average purchase price is up by only 3.4% from R1 167 242 in Q1 2017 to R1 206 519 in Q2 2018. The average purchase price of first-time buyers increased by 3.5% to R907 693.

“Although property price growth is still sluggish and below the inflation rate, there is confidence in the market that property prices will grow more strongly over time, as the economy moves into a stronger growth period, buoyed by improved political and economic sentiment,” says Dyer.