The demand for home loans continued to rise, fuelled by consumer liquidity needs and the pursuit of affordable housing.
According to TransUnion’s Q1 2024 South Africa Industry Insights Report, credit appetite grew despite high interest rates, with consumer confidence slightly improving alongside lower inflation in January and March.
Personal loan originations saw the strongest year-over-year (YoY) growth at 20%, marking the third consecutive quarter of outpacing other credit products. Retail instalment loan originations also increased by 10%, with the average new loan amount up by 14.5%.
Growth in consumption-led credit products was largely driven by Gen Z, who are increasingly contributing to the labour market and credit economy.
TransUnion’s Q2 2024 Consumer Pulse survey revealed that 77% of consumers were concerned about inflation for everyday goods, 55% worried about interest rates, and 52% were concerned about jobs.
“South African consumers remained resilient through the first quarter of 2024, keeping up with their payments and leveraging their access to credit to maintain liquidity,” said Lee Naik, CEO of TransUnion Africa.
“Lenders seeking to maximise opportunity in the current economic environment will win the loyalty of resilient consumers by offering agile financial solutions that provide flexibility for their consumption needs.”
Strong Demand for Home Loans
Home loan originations increased by 6.7% YoY in Q1 2024, although average new loan amounts decreased by 6.2%, reflecting a rise in the affordable housing sector, driven by first-time home buyers.
There was a 9% YoY growth in below prime home loans, while prime and above risk tier loans fell by 10%. Gen Z saw a 32% YoY growth in home loan originations, holding 9.2% of new mortgages.
Affordable housing accounted for 36% of property sales in 2023, with 50% of registered properties valued at R750,000 or less. Despite the decline in new loan amounts, total outstanding home loan balances increased by 7.6% YoY, indicating that consumers are leveraging home equity for liquidity.
However, home loan delinquencies worsened by 140 basis points YoY, prompting lenders to take a proactive approach to managing potential delinquencies due to high interest rates.
Resiliency of South African Consumers
Despite higher home loan delinquencies and a slight increase in vehicle finance delinquencies, the credit performance for consumption-driven products improved in Q1 2024, with delinquency rates decreasing across all unsecured credit products.
Lenders are focusing on lower-risk consumers for personal loans, resulting in a 5.5% YoY increase in loans to prime and near prime borrowers and a 250-basis point improvement in delinquencies.
Gen Z consumers continue to prioritize credit card payments, contributing to better portfolio performance.
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