Mortgage approvals stabilise after NCA teething period

Mortgage approvals stabilise after NCA teething period

Banks relax lending criteria - rise of 30 year loan making homes more affordable.

The implementation of the National Credit Act in June this year caused a slowdown in mortgage approvals as banks and applicants adjusted to the new regulations - but now SA's leading originator reports that approvals are returning to pre-NCA levels.

"Approval turnaround times are tending back to pre-NCA levels while the rate of declines in mortgages has been marginal since the new regulations came in", says Kay Geldenhuys, Property Finance Processing Manager at MortgageSA.

"These declines have occurred predominantly around clients who are already over-extended in debt," says Geldenhuys,

"When the National Credit Act was initially implemented, we experienced a temporary slower turn-around time for the approval of our applications.

"However, after a short adjustment period, banks have adapted and streamlined their NCA processes and service delivery across all banks has returned to normal.

"Most of our banks have also reviewed their stricter lending policies which they implemented on 1 June and have become less conservative as they become comfortable with the new Act's requirements."

Early experience of the NCA indicated variations in banks lending criteria whereupon clients declined by one bank were often approved by another if the application was shopped around.

"Although we are still experiencing this trend," says Geldenhuys, "We do expect that the differentiation in bank's lending policies will diminish in the near future due to competitive activity."

Geldenhuys notes that most banks initially charged clients the maximum mortgage loan fees allowed in terms of the Act, however competitive market activity has resulted in the banks reducing their fee structures.

There are a few trends emerging on the back of the new act, one of which is an increase in the popularity of the 30 year bond term.

"We have also seen a tendency for applicants to pay a deposit as opposed to applying for a 100% risk loan in order to improve their prospects of qualifying for a home loan" says Geldenhuys. "This, together with an increase in popularity for the 30 year bond term has made home loans more affordable."

While there have been slight changes in the mortgage application process due to regulations imposed by the act, MortgageSA's experience of the NCA has largely been positive.

"We believe that the new act has provided us with an opportunity to add value to our client's home buying experience" says Geldenhuys. "We are able to pre-qualify clients under the new Act's criteria and also guide and assist our clients with collating the additional information required by banks in terms of the new Act."

"Our MSA Pre-Approval Certificate provides both the agent and the purchaser with the peace of mind that the purchaser will qualify for bond finance on the prospective property to be purchased." concludes Geldenhuys.

Hello ooba news

The implementation of the National Credit Act in June this year caused a slowdown in mortgage approvals as banks and applicants adjusted to the new regulations - but now SA's leading originator reports that approvals are returning to pre-NCA levels.

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