Standard Bank has overtaken Absa to become the mortgage bond market leader in South Africa, increasing the size of its home loan book to R275 billion from R244bn over the past 18 months.
Steven Barker, the head of home loans at Standard Bank, said yesterday that the lender had an overall market share of 32 percent at the end of last year, compared with about 27 percent previously, and it financed about one in three of all new mortgage advances.
The growth in Standard Bank’s mortgage loan book is related to it writing a lot more business because not all its bank competitors, particularly Absa, have had as strong an appetite as in the past for providing mortgage finance.
Reserve Bank data showed that at the end of January last year Absa was the market leader with 30.57 percent of new mortgage advances, followed by Standard Bank (30.7 percent), FirstRand (18.48 percent) and Nedbank (16.83 percent).
Standard Bank has grown its mortgage bond book at a time when there has been a slump in the property market, resulting in a contraction in the number and value of home loans approved and granted.
Barker said that new mortgage advances totalled R360bn in 2007 but only R120bn in new mortgage advances were granted last year.
The strong growth in Standard Bank’s mortgage bond book had demanded that it spend a lot of time understanding the risk of loans granted and pricing these loans appropriately to take into account the risk, he said. The bank still provided 100 percent loans for houses under R1.5 million, particularly to its own banking customers and people with lower risk, but it was more selectively than in the past.
However, Barker said that the bank generally needed a 10 percent deposit for loans of more than R1.5 million and expected a 20 percent deposit for loans greater than R2.5 million.
Barker said foreclosures of mortgage bonds were still high but were starting to move in the right direction.
Non-performing loans were declining although the bank would like this to happen faster but the property market was not providing a major underpin to allow distressed borrowers to exit the market.
Barker said the level of pre-payment of mortgage bonds was lower than in the past, which was indicative that the purchasing power of consumers was being eroded by the steady incline in consumer price inflation and the strain households were still under to reduce debt.
Prepayment refers to households paying more than the minimum monthly repayment amount on their mortgage bonds. Barker said the only reason many households could afford to carry their current debt levels was because interest rates were low.
Sibusiso Gumbi, a home loans analyst at Standard Bank Research, said the deleveraging of household debt was continuing but at a snail’s pace and household debt to disposable income was still not far off the peak of 82 percent.
Gumbi said the country’s poor economic growth outlook, coupled with feeble economic consumer confidence and rising inflation, painted an uninspiring outlook for consumer spending and house price growth this year was likely to mirror this.
He said house price growth remained fairly muted last year, with Standard Bank’s median year-on-year house price growth negative at minus 0.5 percent in December.