HOUSING: More 100% Loans As Buyers Clean Up Their Credit
Recent Western Cape Business News
A surprising number of home loans are now being approved at 100% of the property purchase price, according to the latest statistics from leading mortgage originator BetterBond, but this does not necessarily reveal a slackening of credit qualification criteria on the part of lenders.
These figures show that while the majority of home loan applicants are still required to have a deposit of between 10% and 40%, depending on the type of property they want to buy, almost one in every five (18%) of the loan applications processed by BetterBond is now being approved for a 100% loan.
In addition to this, says BetterBond CEO Rudi Botha, some 13,5% of applicants are obtaining loans for up to 104% of the property’s value through the special first-time buyers’ packages being offered by some banks in the affordable market sector. (See chart below).
“What this means is that more people are being enabled to get a foothold in the market at a time when interest rates and prices are low. In the case of first-time buyers, the loans sometimes even include transfer and bond registration costs that would otherwise have to be paid in cash.
“And we should not forget that many people who are buying through the banks’ assisted sales programmes for financially distressed homeowners are also able to access 100% bonds as well as a 50% reduction in transfer costs.”
However, he says, what is most significant about the increase in the number of 100% loans is that it indicates an increase in the number of potential borrowers with sound credit records. “The banks are not reluctant to grant 100% bonds, but they do have to impose strict conditions and follow stringent guidelines in terms of the National Credit Act.
“The fact that more homebuyers are able to access 100% finance is thus a good pointer to the fact that the financial position of households is steadily improving as people pay down their debts and get their finances under control.”
Botha does caution though, that there are seldom any rate concessions on 100% loans, whereas borrowers who are able to pay a deposit of 10% or more may well be able to negotiate a lower interest rate, especially if they have good credit histories and apply through an originator.
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