Uptick in household credit and mortgage balances growth in the first half of 2018

Posted On Monday, 30 July 2018 13:14 Published by
Rate this item
(0 votes)

Uptick in household credit and mortgage balances growth in the first half of 2018, while home loan repayment patterns were divergent across income categories in the twelve months up to mid-2018


Outstanding credit balances in the South African household sector amounted to R1 580,3 billion at the end of June 2018, with growth that measured 4,5% year-on-year (y/y) in the first half of the year, compared with 4,2% y/y at end-May and 2,9% y/y a year ago. 

The value of household secured credit balances (R1 208,6 billion and 76,5% of total household credit balances), which includes mortgage, leasing and instalment sales balances, increased by 4,8% y/y in the 6-month period up to end-June. Mortgage balances growth showed some improvement from end May (see below), with growth in instalment sales balances (R266,9 billion and 22,1% of total household secured credit balances) rising to 6,3% y/y up to end-June from 6,2% y/y at end-May and only 0,8% y/y at the end of June last year. Trends in household instalment sales balances are closely related to the vehicle sector, with new passenger car sales volumes rising by 3,9% y/y in the second quarter of the year.

Growth in the value of household unsecured credit balances (R371,7 billion and 23,5% of total household credit balances) accelerated to 5,7% y/y at the end of June from 5,3% y/y up to endMay and 4,2% y/y a year ago. General loans and advances balances (mainly personal loans and micro finance and with a share of 58,6% in unsecured balances), increased by 5,7% y/y to R217,9 billion up to the end of June. Growth in this component of household unsecured credit balances showed a rising trend since the start of the year.

Outstanding private sector mortgage balances (R1 379,3 billion and 39% of total private sector credit balances of R3 538,4 billion), which include both corporate and household mortgage balances, increased by 4,5% y/y up to the end of June this year. Corporate mortgage balances (R439,3 billion and 31,9% of total private sector mortgage balances) increased by  7,5% y/y up to end-June. Growth in outstanding household mortgage balances (R940,0 billion, with a share of 77,8% in total household secured credit balances and 68,1% in total private sector mortgage balances) increased to 3,6% y/y up to end-June from 3,3% y/y at end-May and 3,1% y/y at the end of June last year. 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. 

Growth in household credit is forecast at around 4,5% for the full year, with mortgage balances growth projected at 3,5% for the year, driven by trends in and prospects for the economy, household sector finances and consumer confidence.

Homeowners’ mortgage loan repayment patterns on primary residences improved in some instances in the 12-month period from mid-2017 up to the middle of this year, but divergent trends were evident across income groups over this period. The latest trends in home loan repayment patterns are presented on the last page of the report. 

Based on information published by Old Mutual in the July 2018 edition of the Savings and Investment Monitor, home loan repayment patterns on primary residences have improved up to the middle of the year from mid-2017. The percentage of homeowners paying the minimum only on their mortgage loans declined from 77% last year to 71% in mid-2018, which was historically still relatively high compared with previous years since mid-2010. The percentage of homeowners paying extra into their mortgage loan accounts on a monthly basis almost doubled from 12% in mid-2017 to 23% by mid-2018, which was the highest percentage since mid-2014 when it was at a level of 28%. The percentage of homeowners paying extra lump sums into their mortgage loan accounts remained on a steady declining trend from 9% in mid-2015 to only 3% by mid-2018, which was the same as back in mid-2010.

Home loan repayment patterns were in certain instances divergent across the various income categories over the past year up to mid2018 (see relevant table below). Low- to middle-income homeowners, i.e. those in the income categories of R6 000-R13 000 per month and R14 000-R19 999 per month, were increasingly paying the minimum only on their mortgage loans since 2016, with less than 10% of homeowners in these income categories that were in a position to pay extra per month in the past three years. None of these homeowners were in a position to pay any extra lump sums into their mortgage accounts in 2017 and 2018. 

Mortgage loan repayment patterns in respect of high-income homeowners improved from mid-2017 up to mid-2018, with the percentage of these homeowners paying the minimum only declining over the 12-month period in both the two top income categories. The percentage of high-income homeowners paying extra into their mortgage loans on a monthly basis showed a significant increase from last year up to the middle of this year. However, the percentage of homeowners in the R20 000-R39 999 per month income category that were able to pay lump sums into their mortgage accounts remained low, while declining markedly from 12% in mid-2016 to only 6% in mid-2018 in the R40 000 plus per month income category.

The above mentioned trends in home loan repayment patterns are regarded as an indication of the general state of and shifts in homeowners’ financial positions across the household sector, based on various factors such as taxes, living costs, interest rates, employment, disposable income growth, savings, debt levels and debt-service costs, which all impacted consumers financially over the years. Trends regarding these factors were reflected in consumers’ credit risk profiles and the extent of financial vulnerability, which affected the ability to service existing debt and the accessibility and affordability of new credit. Against this background, the growth in household credit extension and mortgage advances remained largely subdued up to mid-2018.

Last modified on Thursday, 09 August 2018 00:42

Most Popular

Stable repo rate a boost for first-time home buyers says Dr Andrew Golding

Sep 20, 2018
Andrew Golding
With the rand regaining some ground and inflation surprising on the downside this week,…

SARB keeps Repo rate unchanged

Sep 20, 2018
Consumers will breathe a sigh of relief after the South African Reserve Bank’s (SARB)…

Green Building Convention Brings Built Environment and Sustainability Heavyweights to SA in a Race to Zero

Sep 29, 2018
GREEN BUILDING COUNCIL 1
The Green Building Council of South Africa (GBCSA) will host the 11th Annual Green…

ALP opens warehousing park 75% pre-leased, topping all other real estate segments

Sep 24, 2018
TOBY SELMAN
Africa Logistics Properties has today launched its first 49,000 sqm of modern grade –A…

Sub-Saharan Africa on a path to greater real estate transparency but progress is patchy

Sep 24, 2018
JEREMY KELLY
JLL & LaSalle’s Global Real Estate Transparency Index highlights urgent need for further…

Please publish modules in offcanvas position.