ooba results show banks remain cautious on 100% bonds

ooba results show banks remain cautius on 100% bonds

The latest statistics released by ooba, South Africa's leading bond origination company, reveal that the decision by banks in August 2009 to start granting 100% bonds has significantly boosted the number of consumers applying for home loans.

According to Saul Geffen, CEO of ooba, many would-be homeowners, however, will be left disappointed, as banks remain reluctant to grant the full amounts applied for. "While the granting of 100% home loans is a sign of confidence in the local property market the reality is that the implications of the National Credit Act mean that consumers still have to meet the strict affordability criteria in order to qualify."

The ooba statistics show that the proportion of consumers applying for 100% bonds has jumped to 44% of overall applications in December 2009, up from 18% three months earlier. However, the approval rate on these applications are significantly lower, and nearly half of the bank approvals on these 100% bond applications are made subject to deposits.

Despite the average Rand value per application having remained consistent between December and January, with the higher proportion of 100% LTV applications and the reluctance by banks to grant the full 100% of loan amounts applied for, there has been a 10.5% drop in the average bond size from R707 760 in December 2009 to R633 467 in January 2010. Similarly, it has also contributed to the 27.4% month on month increase in the average deposit size during January.

The oobarometer price index recorded a 4.9% year-on-year rise in the average house purchase price in January to R830 513 from R791, 552 in January 2009. "This is the eight consecutive month of year-on-year price increases, which clearly indicates that the property market is steadily recovering," says Geffen.

The average bank decline ratio showed an improvement of 2.1%. The ratio of applications declined by one lender but approved by another, reflected a month-on-month increase of 3.2% in January indicating that banks are becoming more competitive for business.

"The increased competition between banks for new customers, coupled with improved demand and rising house prices should all combine to support the continued recovery of the local property market in 2010," says Geffen.

Full oobarometer analysis:

Indicator

January

2010

January

2009

Change yr on yr (Jan 10 vs Jan 09)

December

2009

Change month on month (Jan 10 to Dec 09)

Avg purchase price

R 830,513

R 791,552

4.9%

R 870,051

-4.5%

Avg purchase price

of  first time buyer

R 585,992

R 556,575

5.3%

R 596,841

-1.8%

Avg approved bond size

< p align="center">R633,467

< p align="center">R 624,624

1.4%

R 707,760

-10.5%

Avg deposit (as % of purchase price)

23.7%

(R 197,046)

21.0%

(R 166,928)

12.9%

18.6%

(R162,291)

27.4%

Avg age of applicant

37

38

1 year younger

37

No change

Avg decline ratio

50.4%

52.5%

-2.1%

50.3%

0.1%

Ratio of applications declined by one lender but approved by another

19.8%

22.6%

-2.8% decrease

16.6%

3.2

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