Standard Bank cuts off bond flow

Johannesburg - Standard Bank's home loan division followed Absa's lead on Wednesday by cutting off the flow of credit to homebuyers.

The bank recently adjusted its loan-to-value criteria for the second time this year, in terms of which a much larger deposit will in future be required to buy a home. Previously one could obtain a 100% loan for a bond less than R750 000, but this will no longer be the case.

The loan-to-value ratio reflects the bond as a percentage of the property's value.

Leon Barnard, Standard Bank's director for personal and business banking products, told Sake24 on Wednesday the bank had looked at the principle adopted by Absa, and decided it would be more comfortable making the loan-to-value ratio stricter.

This decision was taken specifically against the background of the current market uncertainty.

Last week Absa's home loan division began to restrict consumers' access to equity (own capital) in their bonds in an attempt to reduce risk for clients and the bank.

The decision was taken, he said, to prevent the high-risk cases ultimately landing up in the bank's portfolio.

The adjustment involves the bank granting a 95% bond for new home loans up to R300 000. For home loans between R300 000 and R2.5m, a bond of only 90% will be granted, which means that a 10% deposit becomes necessary, and for bonds of more than R2.5m an 80% loan is applicable.

For vacant erven the deposit remains unchanged at 25%. This applies to Standard Bank chequebook holders with a Standard Bank current account at the time of applying for the loan.

In the case of those without chequebooks, in other words clients without a Standard Bank current account, a 5% deposit will be required for bonds of up to R300 000, 15% for those between R300 000 and R2.5m, and 20% for bonds over R2.5m.

These adjustments take effect from Thursday. Standard Bank does not expect the housing market to improve before early 2010.

- Sake24