Share

Low growth in SA household credit, mortgage balances

Johannesburg - Subdued growth in the value of outstanding credit balances in the South African household sector continued up to May 2015, Jacques du Toit, property analyst at Absa Home Loans, said on Tuesday.

Year-on-year (y/y) growth remained in a relatively narrow band for the past ten months. Growth of 3.2% y/y was recorded in the first five months of the year, which was the net result of a slight uptick in growth in household unsecured credit balances and marginally lower growth in secured credit balances compared with the period January to April this year.

Growth in the value of household secured credit balances came to 3.2% y/y at the end of May, much in line with growth of 3.3% y/y at end-April. Secured credit balances growth up to end-May was mainly determined by growth in mortgage balances (77.3% of household secured balances) and growth in instalment sales balances (22.4% of household secured balances), which slowed down further to 5.5% y/y from 5.8% y/y and 5.9% y/y at the end of April and March respectively.

Household unsecured credit balances - a share of 24% in total household credit balances at end-May - showed growth of 3.5% y/y at the end of the first five months of the year. This was the result of somewhat higher growth in the general loans and advances component at end-April, whereas overdraft balances (9.9% share) contracted by 8.2% y/y in the period January to May. Credit card balances, with a 29.2% share, increased by 8.9 y/y at end-May.

Outstanding private sector mortgage balances, comprising commercial and residential mortgage loans, saw growth of 4.8% y/y at end-May, marginally down from 4.9% y/y at end-April. Growth in private sector mortgage balances growth was the combined effect of continued double-digit growth in corporate mortgage balances, whereas growth in household mortgage balances was somewhat lower at the end of May from end-April.

The outstanding value of household mortgage balances increased by an amount of R2.4bn from end-April to a total of R842.1bn at the end of May, with growth of 2.7% y/y recorded over the five-month period.

Year-on-year growth in this component of household credit balances has been in a narrow range below the 3% level since January 2013. The value of outstanding mortgage balances is the net result of all property transactions related to mortgage loans, including additional capital amounts paid into mortgage accounts and extra monthly payments above normal mortgage repayments.

Based on trends in and the outlook for a range of macroeconomic and household sector-related factors and variables, growth in the demand for credit by households and the value of outstanding credit balances is expected to remain subdued in the rest of the year, according to Du Toit.

John Loos, household and property sector strategist at FNB said on Tuesday slow household sector credit growth these days is not only about sluggish mortgage growth, but increasingly about slow growth in the non-mortgage categories.

"This slow growth, however, is appropriate at a time of weak economic growth which has constrained household disposable income growth to such an extent that, despite slow credit growth in the first quarter, the household debt-to-disposable income ratio actually rose slightly," said Loos.

"With regard to the mortgage credit category, slow new loan growth along with the run down in the large boom time component of loans will likely sustain further real (inflation adjusted) decline in this major category of household credit."


We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
19.02
-0.4%
Rand - Pound
24.13
-0.1%
Rand - Euro
20.64
-0.2%
Rand - Aus dollar
12.39
+0.3%
Rand - Yen
0.13
+0.4%
Platinum
901.05
-0.2%
Palladium
999.00
-0.7%
Gold
2,149.46
-0.5%
Silver
24.83
-0.8%
Brent Crude
86.89
+1.8%
Top 40
65,951
-0.5%
All Share
72,164
-0.4%
Resource 10
53,288
-0.1%
Industrial 25
99,497
-1.0%
Financial 15
16,657
+0.2%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders