25 Nov 2014
Bond originators will have to become more skilled and more effective in the coming year if they are to be successful in keeping the flow of mortgage loans to the public at a reasonably satisfactory level.
This is according to Bill Rawson, Chairman of the Rawson Property Group, who says the end of September review of home loans by Absa has shown that the total value of outstanding balances in the South African household sector has dropped by R2.9 billion to R1.394 billion. He says this figure was largely due to unsecured loans, overdrafts, credit cards, general loans and advances but, regrettably, mortgage loans were also among the credit categories to experience a slowdown. By Absa’s calculations, they grew by only 2.2 percent year-on-year, he says.
Rawson says apart from lower overall economic growth and inflation, both of which have impacted on the household consumer, Absa have revealed that lending has been severely curtailed by a significant number of credit-active consumers having impaired credit records.
This factor, perhaps above all, has affected their appetite for risk and led to a tightening up in the lending criteria at virtually all the banks. With high interest rates expected towards the end of this year and in 2015, growth in credit, therefore, is highly unlikely.
Under the circumstances, Rawson says good bond originators have an exceptionally important part to play in helping prospective home buyers to get to grips with their financial situation. This, he says will involve teaching them to understand the banks’ loan criteria and rectify impaired credit records. It is also their responsibility to see that their loans are pitched at the right levels, thereby increasing their chances of success.
Certain Rawson Property Group franchises and other property marketing operations have, with the help of good bond originators, been successful in coaching prospective homeowners to success – with over 90 percent of their bond applications being approved, as against a national average of around 65 percent, says Rawson.
“Rectifying impaired records and aligning oneself to the banks’ requirements can take anything from six to 24 months. However, it is an exercise worth doing, particularly as in the volatile economic situation in which South Africa now finds itself, property owners will be in possession of one of the more stable asset classes.”
COMMENT BY MEYER DE WAAL – HOW TO RESTORE YOUR GOOD CREDIT PROFILE
Luckily the My Budget Fitness Programme developed by us caters for home loan applications that are declined says Meyer de Waal, a practising attorney and director of My Budget Fitness. When you participate with My Budget Fitness, we investigate the reason why your home loan was declined – it can be anything from a bad or negative credit profile, lack of affordability, or lack of a sufficient deposit.
Once we have established the problem we then design a tailor made programme to the aspiring home buyer, provide him with home ownership education, tools to prepare a personal budget, tools to manage and track each rand that you spend and follow you spending patterns.
The aim is to go back to a bank a few months later, with a proven track record, when your credit profile and affordability have been improved and you had the opportunity to save towards a deposit. In many instances the Rent2buy concept also enables the aspiring home buyer to secure a home much faster, through this innovative concept to own your own home.
Meyer de Waal
021- 461 0065 firstname.lastname@example.org