First time buyers feeling rate heat

First time buyers feeling rate heat

ooba, (formerly MortgageSA), SA's largest bond originator, says that first time property buyers are feeling the pressures of higher interest rates and have adapted their buying behaviour.

Saul Geffen, chief executive of ooba, said that according to ooba's data, the average price of a property bought by first time buyers has fallen from R548 800 in June 2007 to R521 600 in June 2007.

"That's a decline of 4.9% in the past year in the average price paid by first time buyers. Most of that decline has occurred in the past month with prices dropping from R542 400 in May 2008 to June's R521 600, a decline of 3.8%."

According to ooba's data, the average price of all property purchased, which includes first time buyers, has dropped from R807 000 in June 2007 to R793 600 in June 2008, a fall of 1.7%.

"Affordability right now is a major issue with bond repayments up nearly 40% in the past 2 years. Loans are also more expensive, with the average interest rate concession to prime falling from 1.31% to 1.25% in the past year."

In June 2008, ooba's interest rate concessions achieved for the top 10% of applicants with the best risk profiles was between 1.85% to 2.45% below prime.

ooba's statistics also show that 50.1% of all home loan applications were rejected by the banks in June 2008, up from 40.3% of applications in June 2007.

Said Geffen: "However, when an application is rejected by one bank it is often approved by another. ooba's stats show that more than a third of all the home loan applications declined by one bank in June 2008 are approved by the other banks it sends the application to."

Geffen notes that ooba experiences large variances in the interest rate concessions given between the banks, even on the same home loan application.

"Just a 0.5% difference is significant, and getting the wrong rate can mean adding a huge amount to the total cost of the loan and your monthly repayments.

"Buyers and especially first time buyers must shop around and secure home loan approval at the best interest rate," said Geffen.

"It's much easier with a reputable bond originator on your side."

Banks have also made things tougher for buyers by tightening their lending criteria. Currently only FNB and Nedbank are still granting some 100% loans with other banks requiring deposits of between 10 and 20%.

Hello ooba news

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