Good news for home loan approval rates in South Africa

Buying a new home continues to become more affordable as weakening housing demand results in ongoing negative real price growth (after inflation) in the residential property market.

For the first quarter of 2019 (Q1 19) statistics from home loan comparison service, ooba, show negligible year-on-year growth in the average purchase price of 1.6% from Q1 18 to Q1 19.

Growth in the average purchase price for first-time buyers was also minimal at 0.5% from Q1 18 to Q1 19. This means that house price appreciation remains below inflation, reflective of the current uncertain economic and political landscape, ooba said.

Rhys Dyer, CEO of ooba, said: "Over and above more affordable property prices, buyers in the current market are also benefitting from higher bank approval rates. Banks continue to display a robust credit appetite and are increasingly approving home loans with lower deposit and also increasingly with no deposit requirements.

"This is indicative of the banks' confidence in the property market and in customers' ability to repay loans."

"Our home loan approval rate of 81.3% in the first quarter of 2019 was the highest on record for ooba since May 2007 and importantly, the approval rate on applications without a deposit (100% loans) has increased by almost 8% on Q1 2018," Dyer  said.

The average deposit as a percentage of purchase price is down by 11.3% year-on-year compared to Q1 2018, from 16.0% of the purchase price to 14.2% of the purchase price in Q1 2019. Similarly, ooba's statistics showed that deposits for first-time home buyers are down by 21.6% over the same period from 12.5% of the purchase price to 9.8% of the purchase price.

"More affordable property prices, coupled with reduced bank deposit requirements, higher approval rates and improved home loan pricing create a perfect opportunity for property buyers at present," said Dyer.

Banks are competing for a bigger share of the home loans market by approving finance at historically low interest rates, ooba said.

The group's statistics for Q1 2019 show that the average interest rate is 5 basis points cheaper year-on-year. The average rate that ooba achieved for its buyers in Q1 2019 was 0.11% above prime compared to 0.16% above prime in Q1 2018.