Mortgage originators saving SA consumers R30bn annually

Mortgage originators saving SA consumers R30bn annually

Mortgage originators are collectively saving South African consumers R30bn a year in interest charges through lower home financing costs.

This is thanks to the discounts to the prime lending rate originators achieve by shopping around at various banks on behalf of homebuyers to secure the lowest borrowing rates possible says the company that started bond origination in South Africa in 1999.

There is no charge to homebuyers for originators' services.

Rhys Dyer, chief operating officer of MortgageSA, the country's leading bond originator that has placed over 300 000 people in their homes with over R100bn in mortgages, says that prior to the advent of origination banks offered customers homeloan rates of, on average, 0.5% below prime.

"Since originators came on the scene, we have driven this average rate concession down to 1.5% below prime, saving consumers on average 1% on their rate concession.

"This 1% saving - based on annual new homeloan values - represents a R30 billion interest savings annually to consumers over the life of their bonds."

Dyer says that in the current cycle of rising interest rates, consumers need to be even more certain that they are getting the lowest rate when they look for a homeloan because even a 0.1% lower rate will make a significant difference over the life of a bond.

"Assuming a person takes out a 20 year, 100% homeloan for R1m at 11.7%, that is 1.8% below the current prime rate of 13.5%, the monthly repayments will be R10 802.43 per month.

"At a borrowing rate of 11.6%, or 1.9% below prime, the repayments will be R10 733.28 per month. The 0.1% lower borrowing rate adds up to a saving of nearly R17 000 over the life of the bond."

At a borrowing rate of 11.5% or 2% below prime, the saving will be over R33 000 over the life of the bond.

"This clearly shows that it really pays consumers to not just accept the first rate offered to them but to shop around. It?s easiest to do this with the help of an originator."

Dyer notes that as early experience of the NCA has shown that there is variation in banks' lending criteria so we have seen that people declined by one bank are often approved by another if the application is shopped around.

Hello ooba news

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