Ooba says it has witnessed a 'marked increase' in home loan applications following the recent interest rate cut, reflecting a positive shift in the housing market.
Key performance metrics, such as average daily application intake, average bond size, and conversion rates, have all exceeded budget expectations, the mortgage originator said.
Notably, bond production for October rose by 18.7% compared to the same period last year and 26.8% compared to the previous month. This strong performance positions ooba well for continued success, with its existing business on track to meet budget targets, it said as part of an investments update from African Rainbow Capital Investments.
Data from Standard Bank indicates an uptick in home loan applications and new home loan approvals.
“The increase in home loan activity is largely due to improved economic conditions and lower inflation, but affordability remains a challenge for many,” said Toni Anderson, head of Standard Bank Home Services in a note in November. “We’re hopeful that the further rate cuts expected next year will have a positive impact on household incomes.”
“With improving affordability, we expect to see sustained growth in home loan applications and property purchases,” Anderson said.
According to the Reserve Bank’s Financial Stability Review, however, South African homeowners continue to face increasing financial strain. Rising mortgage defaults and a larger portion of disposable income being allocated to debt servicing underscore the pressure on households.
The Reserve Bank’s data indicated that nearly 10% of household income is now dedicated to debt repayments, exacerbated by interest rate hikes since late 2021.
While savings built up during the pandemic initially provided a buffer, the economic reopening and subsequent interest rate increases have left many households struggling to keep up with rising costs.
The National Credit Regulator reported that over 10 million credit-active consumers had impaired records in Q1 2024, highlighting the vulnerability of many South Africans.
The property market also reflects these challenges, with 23% of homeowners selling due to financial hardship in Q3 2024, up from 21% in the previous quarter, according to FNB data.
Mortgage arrears have also increased, with 7.8% of debtors falling behind on payments by mid-2024, well above the historical average of 4.5% to 5%.
The broader economic pressures, including soaring inflation, stagnant wages, and continuous interest rate hikes, have placed significant strain on household budgets. Essential expenses such as food, fuel, and utilities have further tightened disposable income, amplifying the financial difficulties faced by many borrowers.
Clive Bredenkamp, Proptech IT Executive at e4, says as consumers seek out competitive home loans, lenders must revisit conventional approaches to home loans, embracing new technologies.
“Entering a cycle of declining interest rates and an increasingly optimistic economic outlook has created a more favourable buying environment for homebuyers, which in turn presents a more competitive environment for banks, where simply offering the best rates may not be enough to fully capitalise on market share.
"Rather, banks have an opportunity to differentiate themselves through a holistic, value-added customer experience as well as bundled services that cater to their homeownership journey,” Bredenkamp said.
“Banks that incorporate digital tools, rewards programmes, personalised payment plans and even additional packaged services such as solar financing options and home maintenance support packages can differentiate themselves from competitors.”
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