Banks 'stingy with homeloans'

Johannesburg - Banks have still not joined the housing recovery party in any meaningful way despite earlier assurances that they are open for business again, estate agents said.

Andrew Golding, CEO of the Pam Golding Property (PGP) group, said in a media presentation in Cape Town earlier this week that the promised loosening of the credit lending taps have to date been "very marginal".

Golding said although the number of housing sales has risen by as much as 20% over the past six months, increased activity is primarily due to improved sentiment and the fact that home buyers who have the ability to transact on a cash basis are now prepared to do so.

Golding said the upward trend in housing transactions is likely to continue through 2010. However, he believed the major catalyst for the "true re-ignition" of the residential property market in SA will be when the banks start to vigorously lend again and actually compete for business. "It is our hope that this will begin in earnest towards the end of first quarter 2010."

Other estate agents have voiced a similar view, saying that home loan applications are still not being approved as readily as they should be, given banks' public commitment to relax their lending criteria.

Century 21 MD Colleen Gray said the real estate industry is waiting in vain for the much-heralded easing. Although bond application approvals have improved, deposits of 10% are still needed in most cases where properties are priced at more than R1m.

Gray said the fact that the National Credit Act (NCA) requires an overly onerous bond approval process might be a key reason why banks' much-anticipated return to the home loan market is being hampered.

Said Gray: "The NCA is arguably the toughest credit legislation in the Western world and even extremely creditworthy individuals have seen their bond applications turned down. It's time for a reality check."

Meanwhile, figures from mortgage originator ooba confirm that banks remain cautious in terms of mortgage lending. According to ooba, the average bank decline ratio in October was 49.6%.

In other words, one in every two home loan applications was declined by banks last month. In addition, the average deposit banks required as a percentage of the purchase price in October remained at a relatively high 15.6%.

Latest figures from the National Credit Regulator also suggest that banks still have a long way to go to push mortgage lending volumes back up to levels seen 18 months ago. The value of new home loans approved slipped to R17.6bn in second quarter 2009, down 60% from the R42.6bn in second quarter 2008.

- Fin24.com