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Banks are actually quite motivated to secure qualified bond applicants at the moment , particularly in the first-time purchase space . We ’ re still seeing loans of 100 % to 105 % being offered , which means those ready to make the leap into homeownership may not even have to save for a deposit , first .
The simple fact is , the higher the loan-to-value ratio – or the higher the percentage of the purchase price the bond covers – the greater the risk to the lender ,” he explains . “ That means buyers looking for 100 % or higher home loans need to present a very stable financial picture , and will still find themselves getting much higher interest rate offers than if they ’ d saved for a deposit first .
Those willing and able to put down a typical 10 % or higher deposit , on the other hand , represent a far less risky investment for lenders . As a result , they may find it easier to qualify for home finance , and receive finance offers at more favourable interest rates .
But what is a favourable offer in today ’ s lending climate ?
At the moment , the vast majority of home loans are securing belowprime rates . It ’ s extremely rare for a bank to go above prime at the moment , although the higher percentage loans are coming close .
Just because lenders are eager doesn ’ t mean buyers don ’ t have their work cut out for them , though . The biggest hurdle we ’ re facing at the moment is affordability . An applicant who had enough secure , disposable income to qualify for a R1 million bond a few months ago may now qualify for much less – not because of anything happening with lenders , but rather because the average South African ’ s daily expenses have raised so much that their disposable income is now significantly reduced .
Between the rising cost of things like credit card debt and vehicle
124 NOV 2022 SA Real Estate Investor Magazine