Low growth in SA household credit, mortgage balances | Fin24
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Low growth in SA household credit, mortgage balances

Jun 30 2015 18:36

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."

fnb  |  absa  |  sa economy  |  credit  |  mortgage


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