Johannesburg - An estimated 41.5 percent of the total mortgage bonds on residential properties registered at the deeds office in the second quarter had a loan-to-purchase (LTP) value of 100 percent to 109 percent of the transaction value of these homes, according to FNB.
Household and property sector strategist at FNB Home Loans, John Loos, said yesterday that this was slightly lower than the 43.1 percent multi-year high reached in the final quarter of last year but not sufficiently lower to be able to draw conclusions on a possible declining trend. He said this latest estimate of the percentage of bonds falling into the 100 percent to 109 percent LTP price band was well below the peak of 65 percent reached in the second quarter of 2007.
But Loos stressed that these latest estimates were also well above the post boom low of 25.4 percent reached in the third quarter of 2009. He said in the first quarter of this year they identified from deeds office data 9 951 bonded transactions by individuals in the 100 percent to 109 percent LTP value price range.
Loos said this was more than double the 4 117 low reached in the third quarter of 2009 but much lower than the 33 825 high reached in the third quarter of 2006.
He said houses with an average price of R358 934 were most dependent on 100 percent to 109 percent mortgage bond loans and accounted for 49.5 percent of the total mortgage bond loans to individuals in the second quarter.
Houses in the category with an average price of R658 922 had the second-highest percentage of loans in the 100 percent to 109 percent LTP price band at 42.2 percent, he said.
Loos said the lowest dependence on 100 percent and above mortgage bond loans was in the most affluent segment of the housing market where the average transaction value was R2.442 million, with 22.1 percent of mortgage bonds for these homes falling into the top LTP price band.
Loos said housing market mortgage lending institutions and mortgage borrowers had for a long time been known for their “pro-cyclical” behaviour.
This had resulted in increased lending or borrowing when interest rates were low and both lending institutions and borrowers becoming more conservative when interest rates rose.
But Loos said there had been a more delayed LTP value response in the past two interest rate hiking cycles to the onset of interest rate hiking.
This could be attributable to an increasingly competitive banking and mortgage lending environment, which may push lenders to be more competitive on lending for longer into a deteriorating cycle.
He said that a potential reason for the lack of any noticeable downward response in the average LTP value in the past two-and-a-half years of interest rate hiking in South Africa since January 2014 was that lenders might feel that the lending criteria were still sufficiently cautious after a very significant post boom pull-back in 2008.
But Loos said greater confidence in the Reserve Bank not to shock the market as it did in the late 1990s was believed to be key to the seemingly more delayed response by mortgage lenders to rising interest rates over the past two cycles.
“So when the bank starts its rate hiking these days, one senses that we all still have considerable time on our side and the magnitude and speed of hiking won’t necessarily be severe,” he said.