Lending: no govt intervention

Cape Town - Government will not intervene legislatively to force commercial banks to ease credit extension, according to Finance Minister Pravin Gordhan on Monday.

Such an approach will not work, and the global financial crisis has demonstrated quite clearly that forcing credit onto the less creditworthy customers can put the entire financial system's stability at risk," he said in written reply to a parliamentary question by the Democratic Alliance.

"Government will therefore not seek legislative powers in this regard," Gordhan said.

The National Treasury was, however, monitoring the provision of credit to the household and business sectors, and engaging with other sectors on how best to respond to the current financial and economic crisis.

With regard to housing loans, commercial banks had started to ease credit criteria for mortgage advances by reducing the required deposits and in some instances by offering loan-to-value ratios (LTVs) of up to 100% for new home owners, he said.

This should assist in anchoring the recovery of the real estate market in the short- to medium-term.

On the issue of a shortage in the housing stock, while there might be a shortage of low income housing, there was probably a surplus of high-income housing as a result of too much construction during the boom period.

This was, to some extent, demonstrated in the housing price figures, with prices of smaller homes proving to be relatively stable, while prices of larger houses had fallen quite rapidly, Gordhan said.

- Sapa