Is there any point in waiting to save up a large deposit on a home when interest rates are declining and the banks are in a hurry to grant more home loans?
“Many buyers are taking the view,” says Rudi Botha, CEO of BetterBond, SA’s biggest bond originator, “that they should take advantage of the current lending conditions and secure a home loan with whatever deposit they have, rather than wait to save more and risk stricter lending conditions, higher home prices or interest rates starting to rise again.
“This is reflected in our latest statistics*, which show a sharp drop in the average deposit being paid by SA home buyers from 22,5% of the purchase price to 19,75% over the past 12 months, and a concomitant increase in the percentage of home loan applications approved, from 75% to 80%.”
There is some sense of urgency to get into the market, he says, because prices are only rising at about 3% a year at this stage but are expected to pick up momentum towards the end of the year, especially if interest rates continue to move downward and economic activity picks up.
“However, we believe the best choice if you are in haste to become a homeowner is to use whatever cash you have saved up to pay a bigger percentage deposit on a less expensive property – not a smaller percentage deposit on a higher-priced property.”