Banks ask bigger home deposits

Johannesburg - Banks are insisting on higher deposits from new homebuyers, reflecting the tighter lending landscape and higher bad debts, home loan originator ooba said on Thursday.

ooba, formerly Mortgage SA, said average deposits continued to show sizeable y/y rises in November, with a 31.5% increase in the average deposit as a percentage of purchase price from November 2007.

"The increase in average deposits is a function of the significant change in the bank's deposit requirements, given the tighter lending landscape and high levels of defaults," said Saul Geffen, CE of ooba.

Home buyers paid 19.6% for an average bond size of R665 213 - up 31.5% compared with 14.9%, or R123 985, deposit for an average bond size of R703 580 in November last year.

The month-on-month average bank decline ratio, which is the average percentage of all home loan applications initially rejected, has increased to 51.8%; a 1.6% rise from October.

"The increase in the average bank decline ratio reflects the banks' continuing tightening of lending criteria," said Geffen.

ooba's November house price index, oobarometer, showed that home prices were flat y/y at R827 463 , but indicated a big 10.2% rise between October this year and November this year.

"It appears that the increase in house prices from October to November may be attributed to a shift to higher-priced properties in November given affluent buyers' ability to adapt to stricter lending practices," said Geffen.

The average purchase price for first-time buyers increased marginally by 0.5% from October to November, but dropped slightly by 0.6% from R566 702 in November 2007 to R563 354 in November 2008.

The average age of first-time buyers has changed for the first time since the oobarometer was launched now reflecting they are one year older, at an average age of 38, when making their first home purchase.

- I-Net Bridge