Category Residential Property News

If you're in the market to buy a property, now's a very good time to apply for a home loan. Wakefields had more sales with bonds granted this month, than any other month...ever

There are times when the banks' rate of home loan declines are high, and then there's now...where the banks are approving a far higher percentage of home loans. Of course, you need to qualify for a home loan, but it's clear that the banks' doors are open wider than they've been for a while. Ask Wakefields. CEO Myles Wakefield confirmed that the property group has just achieved a record month in sales where home loans were required and approved. That's the highest ever in the 80 year history of the company. It's very good news for those who're about to buy.

We asked Rhys Dyer, CEO of ooba bond originators, why there were so many more bonds being approved today.    

Why are so many bonds being granted? 

  • The home loan market is being buoyed by a few key factors, those being;
  • A shift in the percentage of total residential sales being done in the market that are bonded, versus those that are cash - this is likely a function of more first time home buyers (FTHB) in the market.
  • While application volumes still remain relatively low (as a result of low demand in the property market), the percentage of applications we send to banks that are being approved, has increased significantly.
  • The increased approval rate is a function of two primary factors, one being that more homebuyers are being pre-qualified before they apply for a home loan, improving the quality of the applications; and secondly, there is currently significant competition between banks for loans (given the fewer number of buyers), resulting in banks loosening their credit criteria to compete, and improving their pricing.

Why so many 100 percent bonds? 

 The increase in 100% bonds is a function of more first-time home buyers, who often do not have access to deposits, and also because the bank approval rate on 100% bonds has increased significantly, ensuring that more of those applicants are approved and creating a greater market for 100% bond applications.  

Almost 60% of our applicants in July 2019 were looking for a 100% bond (up from 51% last year - indicating an 18% increase in applicants asking for a 100% bond) and more than 82% of these applicants had their 100% bond application approved by one or more banks.

How good has this been for ooba? How many bonds granted, and what size?

Our granted bonds over the past 12 months are up by just under 10% over the same period last year.  Average bond size is now at R1,03m.  Our approval rate across all our business is now close to 85%, which is the highest we have seen for many years.

How many first time homeowner bonds? 

First time homebuyers represent 50% of our applicants and 49% of our grants.

How good in relation to previous years? 

 First-time homeowner bond applicants are up 2% on last year, and first time home buyer grants are similar to last year.

What does it mean looking forward?  

Looking forward, we expect the higher approval rate environment we are currently experiencing to continue into the short to medium term, as banks continue to compete for new business volumes.

What would change the current scenario? 

 The scenario will change should banks become concerned about an increase in credit losses in their books.  Currently we understand the credit loss ratios to be below the long term average in all banks' home loan books. However should this start to rise - which may be driven by a slowing economy and job losses - banks are likely to pull back on some of their credit and pricing improvements.

Author: Anne Schauffer

Submitted 28 Aug 19 / Views 473