Banks appetite for lending will decide how property performs: expert
Banks appetite for lending will decide how property performs: expert
Consumers warned not to expect too many interest rate concessions.
The residential property market in 2012 will continue to be driven by the banks and their varying appetite for lending.
Rudi Botha, CEO of mortgage originator Betterbond, said lending volumes that prevailed in 2011 would most probably be maintained for most of this year despite the possibility of more competition among banks for certain clients.
He noted that currently new mortgage lending totalled about R7.5 billion a month, and further advances about R2.5 billion a month - with about 25% of these loans being obtained through Betterbond.
In addition, Botha said, consumers should not expect too much in the way of interest rate concessions in 2012.
"The situation now is quite different from a few years ago, when borrowers in good standing could with relative ease secure a rate that was one or even two percentage points below prime rate. These days most loans that are approved are at prime (currently 9%) and then in most instances only if the borrower can pay a 10% deposit.
"However, the good news in this regard is that most lenders are currently credit-scoring potential borrowers to allow for a one or two percentage point increase in interest rates in future, which means that those who are approved for loans should have the financial resilience to cope with such an increase without defaulting and running the risk of losing their homes."
He also pointed out that the requirement for most homebuyers to pay a deposit of at least 10% offered protection against the possibility of negative equity for both individual borrowers and the real estate market in general.
"And we believe this is prudent in the face of the ongoing turmoil in the world's financial markets."
On the other hand, Betterbond is not expecting any increase in interest rates until perhaps the end of 2012 "and this, together with even modest wage and salary increases, will further increase the affordability of home ownership for many people."
As for the real estate industry itself, Botha said economies of scale and cost savings on shared services would be the main drivers for further consolidation among real estate agencies.
Consumers warned not to expect too many interest rate concessions.
The residential property market in 2012 will continue to be driven by the banks and their varying appetite for lending.
Rudi Botha, CEO of mortgage originator Betterbond, said lending volumes that prevailed in 2011 would most probably be maintained for most of this year despite the possibility of more competition among banks for certain clients.
He noted that currently new mortgage lending totalled about R7.5 billion a month, and further advances about R2.5 billion a month - with about 25% of these loans being obtained through Betterbond.
In addition, Botha said, consumers should not expect too much in the way of interest rate concessions in 2012.
"The situation now is quite different from a few years ago, when borrowers in good standing could with relative ease secure a rate that was one or even two percentage points below prime rate. These days most loans that are approved are at prime (currently 9%) and then in most instances only if the borrower can pay a 10% deposit.
"However, the good news in this regard is that most lenders are currently credit-scoring potential borrowers to allow for a one or two percentage point increase in interest rates in future, which means that those who are approved for loans should have the financial resilience to cope with such an increase without defaulting and running the risk of losing their homes."
He also pointed out that the requirement for most homebuyers to pay a deposit of at least 10% offered protection against the possibility of negative equity for both individual borrowers and the real estate market in general.
"And we believe this is prudent in the face of the ongoing turmoil in the world's financial markets."
On the other hand, Betterbond is not expecting any increase in interest rates until perhaps the end of 2012 "and this, together with even modest wage and salary increases, will further increase the affordability of home ownership for many people."
As for the real estate industry itself, Botha said economies of scale and cost savings on shared services would be the main drivers for further consolidation among real estate agencies.
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