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Johannesburg - SA households seem to be trying to reduce their vulnerability to future interest rate hikes by keeping their credit more in check.
South Africa's current rising interest rate cycle should cause a further decline in households' debt-to-disposable income ratio in the near term, according to John Loos, FNB's household and property sector strategist.
This is expected despite low household income growth.
Data from the SA Reserve Bank (Sarb) indicate that households are expected to keep their credit growth rate below that of their nominal disposable income growth.
In February household sector credit growth of 5.25% year-on-year was recorded, slower than the previous month’s 5.6%.
The January growth rate had been slightly faster than December, which could have possibly pointed to a re-acceleration, he said.
"The February number suggests that such concerns were premature. Growth momentum is better illustrated by using month-on-month annualised growth rates," said Loos.
"Here we see a meager 3.72% growth for February, with the 3-month average growing by 4.3%, both rates pointing to very slow growth momentum."
Residential property
While residential property market activity, along with new residential mortgage loan growth, has been brisk in recent times, much of the new loan growth is merely loans “changing hands” as homes change hands, explained Loos.
"Therefore, as yet we have not seen any meaningful increase in growth of the overall value of residential mortgage advances outstanding," he said.
"Simultaneous to slow mortgage growth, we have had large declines in unsecured lending growth, the net result being a slowdown in overall household sector credit growth."
In real terms, adjusting for consumer price inflation, the value of banks’ residential mortgage loans outstanding continued its multi-year decline to the tune of -4.1% year-on-year in January.
"The slow pace in household credit growth is most appropriate at the present time, given that by the fourth quarter of 2013 a slow economy had led to nominal disposable income growth dropping to as low as 6.5%," said Loos.
South Africa's current rising interest rate cycle should cause a further decline in households' debt-to-disposable income ratio in the near term, according to John Loos, FNB's household and property sector strategist.
This is expected despite low household income growth.
Data from the SA Reserve Bank (Sarb) indicate that households are expected to keep their credit growth rate below that of their nominal disposable income growth.
In February household sector credit growth of 5.25% year-on-year was recorded, slower than the previous month’s 5.6%.
The January growth rate had been slightly faster than December, which could have possibly pointed to a re-acceleration, he said.
"The February number suggests that such concerns were premature. Growth momentum is better illustrated by using month-on-month annualised growth rates," said Loos.
"Here we see a meager 3.72% growth for February, with the 3-month average growing by 4.3%, both rates pointing to very slow growth momentum."
Residential property
While residential property market activity, along with new residential mortgage loan growth, has been brisk in recent times, much of the new loan growth is merely loans “changing hands” as homes change hands, explained Loos.
"Therefore, as yet we have not seen any meaningful increase in growth of the overall value of residential mortgage advances outstanding," he said.
"Simultaneous to slow mortgage growth, we have had large declines in unsecured lending growth, the net result being a slowdown in overall household sector credit growth."
In real terms, adjusting for consumer price inflation, the value of banks’ residential mortgage loans outstanding continued its multi-year decline to the tune of -4.1% year-on-year in January.
"The slow pace in household credit growth is most appropriate at the present time, given that by the fourth quarter of 2013 a slow economy had led to nominal disposable income growth dropping to as low as 6.5%," said Loos.
