Banks continue to relax lending criteria

There has been a general perception that banks have not been lending, but statistics from bond originator ooba prove that this is not the case. In fact, banks have continued to relax their lending criteria and deposit requirements since 2009.

Banks further relaxed lending criteria last month and the approval rates consolidated record numbers that were recorded in March. March’s approval rate — 65,4% — was in fact the highest value of approved home loans since October 2008. Of course, this is still quite some way off the 81,2% effective approval rate at the peak of the market in May 2007.

Let’s look at some figures. The bank decline ratio is 8,7% lower from last April at 45,4%. At the same time, the approval ratio has increased from 57,3% last April to 64,4% last month. Does this mean your chances of financing are improving? Quite possibly.

This, together with a decline in the average purchase price since April last year (6,5% decline, from R881 044 last year to R823 483 this year), suggests that potential buyers might want to take advantage of lower prices, an unchanged (low) inflation rate and the generally more relaxed lending criteria.

Saul Geffen, CEO of ooba, says that lower interest rates have improved affordability and have positively influenced approval rates.

“The general view is that interest rates have bottomed, though, so affordability won’t be a factor supporting the market going forward,” Geffen said.

He predicts that moderate price growth should happen after mid-year, so you might want to take advantage of this window of opportunity, if you’d like a fairly good deal. Note that the average deposit size, as a percentage of the purchase price, has dropped 39,6% over the past year, to R108 164. But this is linked to the average approved bond size having increased by 3,7%, to R715 319 in April (from R689 742 last April), which means that a larger deposit hasn’t been a deal-clincher, so to speak.

If you’re a first-time buyer, this will interest you — the average purchase price for a first-time buyer fell to R625 252 from April last year, but by a very moderate 0,2%.

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