Mortgage originators save SA consumers estimated R7.35bn a year

Mortgage originators save SA consumers estimated R7.35bn a year

Aside from the countless hours of hassle dealing with paper work South African mortgage originators have saved home buyers an estimated R7.35bn a year in interest charges through the negotiation of lower financing costs.

"Well over 70% of all new home loans are facilitated via originators, who shop around to find the best rates and secure the approval on the home loan, all at no cost to the consumer," says Rhys Dyer, chief operating officer of ooba (formerly MortgageSA), the country's leading bond originator that has placed over 305 000 people in their homes with over R152bn in mortgages.

Before origination, many buyers received little or no discount to prime and accessed their finance through approaching only a single bank. Originators have been responsible for improving interest rate concessions across all home buyer consumers (including first-time buyers), with rate concessions of up to 2% being routinely achieved at the peak of the market.

For every 0.5% additional concession to prime, the saving on an average size home loan of R1 million represents an interest saving of R86 750 over the life of the standard 20 year bond.

"This 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," says Dyer.

"The origination value proposition is even stronger in the current market, given the global credit crisis," notes Dyer. "The banks have imposed tighter lending criteria and the consumer's ability to access finance has been affected."

Originators approach multiple lenders on behalf of the consumer and the benefit of having one's home loan application assessed by more than one bank, gives the consumer the best chance of obtaining finance and a better deal.

Origination also remains the key distribution strategy for the banks. Dyer notes: "Mortgage origination is a pure outsourcing model for the banks. Origination is a more cost effective alternative for the banks to them having to employ their own sales and distribution staff."

Since 2008 the property market has experienced a slow down due to a combination of factors which include the high price of debt, the introduction of the National Credit Act and banks tightening up their lending policies. This has been exacerbated by the sub-prime crisis, the global liquidity crisis that followed this and the current global economic slow down.

"South African property owners have been hit hard by the recent slow-down in the industry," says Dyer. "The very restrictive lending policies of the banks have compounded the troubles in the housing market."

Consumers are sometimes under the impression that by cutting out originators they themselves will benefit from further discounts but this is not the case as Dyer points out.

"Firstly, originators such as ooba are able to give consumers the advantage of having the banks compete for every loan application, thus ensuring the best deal for consumers, secondly the costs of distribution currently borne by originators would have to be replicated by banks" Dyer points out.

There is hope on the horizon. Interest rates are already 2.5% off their peak of 2008 and further interest rate cuts are expected well into 2009. With improved affordability for consumers, the property market is expected to start recovering by the end of the year.

"The current downward interest rate cycle is a great relief to all South African home owners," says Dyer. "The latest cut by the Reserve Bank on 24th March of 1% will save home owners an additional R730 a month on a R1m homeloan over a 20 year period."

Hello ooba news

The latest oobarometer stats reveal that the average purchase price growth among first-time buyers remains strong at 12.1% in June. This, together with the continued easing in lending criteria, is good news for potential homebuyers in South Africa.

With the property market beginning to show signs of a recovery, it is more important than ever to ensure your home is correctly priced. Jenny Rushin, property finance manager at ooba, SA's leading mortgage originator, said that a property listed at the right price will give sellers the greatest chance of attracting buyers.

South African banks have loosened their lending criteria which has supported a revival in the property market and helped new buyers enter the market says South Africa's leading mortgage originator, ooba.

South Africa's leading bond origination company, ooba, has seen a 55% increase in the value of approved loans from April to September this year, with a 21% surge from August to September alone.

With house price indicators like the oobarometer perking up, smart buyers are slowly returning to the market and need to be armed with how to make the best purchase possible. Ben Seymour-Brown, manager of group direct sales at ooba, said: "We expect more people to return to the property market this year and certainly next as the economy recovers, the effect of lower interest rates is felt and confidence returns to bricks and mortar investment.