Finances hurt mortgage advances

Mortgage advances is expected to continue recording single digit growth for the remainder of 2010, Jacques du Toit, senior property analyst at Absa Home
Loans said. 

Statistics released by the South African Reserve Bank revealed that month-on-month growth was also lower at 0.4% in March (0.7% in February).

Outstanding mortgage balances with regard to the household sector were up by 4.1% y/y in March, slightly lower than the growth rate of 4.3% y/y recorded
in February. Month-on-month growth of 0.4% was recorded in household sector mortgage balances in March, down from 0.9% in February. 

Total credit extended to the household sector, which consists of installment sales agreements, leasing finance, mortgage advances, overdrafts, credit card debt and other loans and advances, increased marginally to 3.6% (y/y) in March from 3.5% in February. On a monthly basis, household credit extension was up by 0.3% in March (1.1% in February), Absa said. 

Household mortgage advances, largely related to residential property continued to record relatively low year-on-year growth over the past few months, the group said. 

This was evident of households' financial position, which is influenced by factors such as tight labour market conditions, pressure on household disposable income, and a high debt-to-income ratio. In addition to this, applicants for mortgage loans have to qualify for finance, based on banks' lending criteria and National Credit Act stipulations, Absa pointed out. 

"Against this background, mortgage advances growth appears to be on a very gradual and slow recovery, but which will be supported by the economic
recovery, low interest rates and a revival in property market conditions," Du Toit said. 

"In view of these developments and expectations, mortgage advances is still forecast to record single digit growth this year," he concluded.

- I-Net Bridge

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