Mortage Bonds in South Africa
HOUSEHOLD SECTOR’S CREDIT GROWTH STRENGTHENS SLIGHTLY BUT STILL VERY WEAK
December saw further decline in the growth in value of outstanding mortgage bonds, but overall household sector credit outstanding saw a slight rise in growth, suggesting a slight increase in growth of shorter term household debt. Outstanding mortgage advances grew by 2.9% year-on-year, down slightly on November’s 3%. Total household sector credit grew by 2.1% year-on-year, slightly up from November’s 1.8%.
While declining growth in residential mortgage bonds growth remains the prime driver of the decline in growth total mortgage bond value, merely due to the size of the residential market, commercial property mortgage bond market weakness has increasingly contributed to the overall trend.
The value of residential mortgage bonds grew by a mere 3.1% in November (segment split data runs a month behind the total figure), which is far down from the 32.94% peak reached in October 2006. By comparison, the commercial property segment has seen a more spectacular decline in its mortgage growth from 41.6% year-on-year in November 2006 to 4.7% by November 2009.
This declining growth trend in mortgage bonds outstanding does not imply that there is no growth in new lending. To the contrary, we believe that by now new mortgage bond lending growth for the country as a whole should have turned positive year-onyear by now. However, SARB indications at a stage last year were that growth in capital repayments on mortgage bonds was outstripping new lending growth, and hence the declining growth trend in the mortgage book.
Although we saw a slight increase in total household sector credit growth in December, it is too early to say that this is the start of a rising trend, and the growth rate remains very weak. At such a weak rate, and given that the economy has begun to stabilise, we expect household sector nominal disposable income growth to outpace credit growth, and for the decline in the debt-to-disposable income ratio to continue in 2010, slowly leading to a more comfortable household indebtedness
It is no secret that professional bond originators can get you a better deal, than dealing directly with lenders. The demand for a bond origination service has increased over the past few years, with more and more people utilising such a service.
In order to receive prime less rates, the utilisation of bond originators have become a vital part in securing a confident choice of mortgage products.
Bond originators or mortgage originators acts as an intermediary who sources mortgage bonds on behalf of individuals or businesses. Traditionally, banks and other lending institutions have distributed their own products.
However as markets for mortgages have become more competitive, the role of bond originators has become more popular. In competitive mortgage markets many lenders use an array of rate offers and other incentives to attract customers.
To many consumers, due to their infrequent purchases of mortgage products, the mortgage market may appear confusing and somewhat daunting. Bond originators can guide them through the process of selecting a suitable mortgage and offer mortgage and property related financial advice. For borrowers with poor credit records, or other unusual circumstances, finding a lender may be difficult.
Bond originators, having specialised knowledge and multiple lending sources, will normally be a valuable resource in obtaining financing.
The sheer volume of business provided by bond originators to the banks, gives the originator negotiating power to muscle low rates for their clients. Usually the bond loan process is much quicker when using bond originators.