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Johannesburg - In January 58% of home-loan applications were declined by the first bank to which they had been submitted.
This is significantly more than the 42.7% rejected in January last year, according to the latest oobarometer from ooba (formerly MortgageSA). The ratio of applications declined by one bank to those approved by another has also declined to 22% from 38% in January 2008.
According to ooba chief executive Saul Geffen, the figures reflect the immediate effect of banks' stricter lending criteria that have prevailed since the end of last year.
A trend directly linked to banks' stricter lending criteria is that the average deposit over 12 months, as a percentage of the purchase price, has risen sharply to 17% (R137 893) from 14.5% (R118 863) in January 2008.
At the same time the average mortgage loan approved has fallen to R641 140, compared with R700 042 in January last year.
The oobarometer price index shows a decline of 4.8%, on an annual basis, in the average house price this January. This brought the average purchase price to R779 033 from R818 905 the previous January.
Geffen expects house prices to fall in the second half of this year, after which the market might start to recover.
But he believes that, now that interest rates are falling, the recovery in the property market will depend on banks' lending criteria.
"The banks will have to be more flexible in their lending criteria to prevent further declines in house prices and allow for an increase in demand for accommodation."
Erwin Rode, property valuer and economist for Rode & Associates, says he can't see banks relaxing their lending criteria to previous levels.
He gives two reasons - the National Credit Act and the global realisation that the over the past few years lending criteria have been too lenient. "We have gone back to 30 years ago, when a 20% deposit was required to buy a house."
He says the implication is that consumers should not expect house prices the recover easily in tandem with falling interest rates.
- Sake24.com
For more business news in Afrikaans, go to Sake24.com.