Monday, 31 July 2017 04:42

Household credit, mortgage advances and home loan repayment patterns

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Low growth in household credit and mortgage balances in the first half of 2017, with home loan repayments showing homeowner financial strain.

The value of outstanding credit balances in the South African household sector showed growth of 2,9% year-on-year (y/y) to a level of R1 510,6 billion in the first half of 2017. This was the combined result of trends in household secured and unsecured credit balances over this period.  

Secured credit balances in the household sector (R1 159,4 billion and 76,7 % of total household credit balances) increased by 2,5 % y/y up to the end of June this year, marginally up from 2,3% y/y at end-May, but down from 3,8 % y/y at the end of June last year. The low year-on-year growth in secured credit balances came on the back of ongoing low growth in household mortgage balances (see below), while instalment sales balances (21,6% of total household secured balances and mainly related to vehicle finance) showed growth of only 0,4% y/y in the 6-month period up to end-June 2017.  

Household unsecured credit balances (R351,4 billion and 23,3% of total household credit balances) increased 4,2% y/y in the period January to June this year. The component of general loans and advances (58,6% of total household unsecured credit balances and largely consisting of personal loans and micro finance) increased by 4,8 % y/y over the 6month period up to the end of June.  

The value of outstanding private sector mortgage balances (R1 316,2 billion and 39,3% of total private sector credit balances of R3 348,4 billion), comprising both corporate and household mortgage balances, showed growth of 4,5 % y/y at the end of June 2017 (5,7% at end-June 2016).

Corporate mortgage balances (R408,8 billion and 31,1% of total private sector mortgage balances) increased by 7,6% y/y in January to June. Outstanding household mortgage balances (R907,4 billion and 78,3% of total household secured credit balances and 68,9% of total private sector mortgage balances) increased by 3,1 y/y up to end-June. The value of outstanding mortgage balances is the net result of all property transactions related to mortgage loans, including additional capital amounts paid into mortgage accounts and extra monthly payments above normal mortgage repayments.  

The South African economy is in a technical recession after two consecutive quarters of a contraction in real gross domestic product, with the forecast of growing by a much subdued 0,3% in 2017. Based on the outlook for the economy, the labour market, household sector finances and consumer confidence, growth in household credit balances, including mortgage balances, is expected to remain relatively low up to year-end. However, lending rates were lowered by 25 basis points in July as a result of an improved inflation outlook and projected continued low economic growth, with another rate cut of 25 basis points expected in September this year.

This will give some further welcome financial relief to indebted consumers. Home loan repayment patterns, which shifted further up to mid-2017 (see relevant text and tables towards the back of the report), are expected to continue to reflect the extent of homeowner financial pressure over the short to medium term. 

Last modified on Wednesday, 02 August 2017 04:50

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