Household credit and mortgage gets a boost
The value of outstanding credit balances in the South African household sector increased by 5,7% to R1 630,2 billion in 2018 after rising by 3,8% in 2017. Growth in both secured and unsecured credit balances improved in 2018 from 2017.
Growth in the value of household secured credit balances (R1 240,3 billion and 76,1% of total household credit balances) increased to 4,6% in 2018 compared with growth of 4,1% in 2017.
The uptick in growth in secured balances in 2018 came on the back of higher growth in household mortgage balances (see below), with instalment sales balances (22,5% of household secured balances and largely related to vehicle finance) growing by 6,8% last year compared with growth of 6,5% in 2017.
Household unsecured credit balances (R389,9 billion and 23,9% of total household credit balances) increased by 9,2% last year after rising by 3,1% in 2017. The component of general loans and advances (59,3% of household unsecured credit balances) accelerated by 10,6% in 2018 compared with growth of only 2,7% in 2017.
Growth in outstanding credit card balances (29% share in household unsecured credit balances) increased to 7,6% last year from 3,8% in 2017. Overdraft credit balances (11,7% of unsecured balances) showed growth of 6,8% in 2018 after growing by 3,6% in 2017.
The value of outstanding household mortgage balances increased by 4% to R960 billion in the 12-month period up to end-December last year, compared with growth of 3,5% in 2017.
The still relatively low mortgage balances growth in 2018 was related to trends in household finances and a continued subdued performance by the residential property market during the course of last year. Various property market indicators pointed to relatively tough conditions over the past twelve months, such as a declining trend in sentiment and properties remaining on the market for a longer period before being sold.
The South African economy is forecast to grow by 1,7% in 2019, after expanding by an estimated 0,7% in 2018. Headline consumer price inflation is projected to average 4,7% this year (4,6% in 2018), with interest rates currently expected to rise by another 25 basis points in the third quarter of the year to keep inflation under control.
Banks’ prime lending and variable mortgage interest rates are forecast to end the year at a level of 10,5% per annum. In view of these expectations, nominal house price growth is projected at 4,9% in 2019, with household mortgage balances expected to grow by about 5% this year.