All four South African banks offer home loans with both fixed rate and variable interest options that can be paid back over a given period of time, from five to 30 years. They also all have a range of options, and most will finance vacant land, homes and also building projects, within their own set of rules. Here is a smattering of information about the four of them.

Absa home loans

Absa Bank caters for individual people and couples who earn either above or below R15 000. They are willing to finance 100% loans for smaller loans, and will tailor-make home loans for their own existing clients. Absa also has a home loan package for people who want to buy and then rent out the property.

First National Bank loans

Like Absa, FNB has options for both individuals and couples who earn up to R15 000 or more than R15 000. FNB has also created specialised packages for both foreigners wanting to invest in domestic property in South Africa, and Muslims who are bound by the Islamic faith that does not allow any form of money interest. FNB’s IslamicFinance package isn’t limited to those of the Muslim faith, but it is only available for bonds in excess of R240 000.

Nedbank home loans

While Nedbank will finance both vacant land as well as houses, they appeal to the higher end of the market, and they don’t offer specific deals for first time home buyers or those people who earn a small monthly income. Like Absa, Nedbank has a specific home loan for those who want to buy and then rent the property out. Clearly aiming at people who aspire to being successful, Nedbank does have a different type of home loan – and this allows borrowers to apply for an amount which is more than the value of the property that they are buying. This additional money is not paid out when the bond is registered, but it is available later, when the property is worth more or when the borrower is able to afford a larger repayment figure.

Standard Bank home loans

Standard Bank caters for the lowest income bracket, offering DreamStart home loans to entry-level home buyers who earn between just R1 500 and R6 000 a month. Standard also has home loans available for first time buyers who earn at least R6 000 both jointly (husband and wife) or on their own. Their standard (or ordinary) home loans are offered to anyone in permanent employment who earns more than R6 000. It will be up to you to decide whether this bank offers the best home loan or whether you will find it at another financial institution.

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Home loans for first time buyers

Loans for first time buyers are available to couples and individuals who earn at least R6 000.00 a month and who have never had a home loan before. Currently these loans are available for 100% plus costs totally up to 4%. Loan holders are obliged to pay via debit order. The usual repayment period at this time is 20 years, which also applies to the other home loan types.

The DreamStart home loan

Another immensely popular home loan package from Standard Bank is their DreamStart home loan that aims to make it easier for what they term “entry level” income earners to get into the property market. Borrowers need to be earning between R1 500.00 and R6 000.00 a month excluding any additional subsidies or allowances. This can be the figure earned between husband and wife, which gives an enormous number of people the opportunity to own a home of their own. Like the first-time buyers loan, the DreamStart home loan must be paid monthly by debit order.

Standard home loan option

This bank’s ordinary (or standard) loan opportunities are applicable to individuals or couples who earn more than R6 000.00 and are permanently employed. The amount of the instalment required to repay the loan cannot be more than 30% of earnings. Instalments must be paid by debit order or with a salary deduction paid by the employer monthly. Unlike loans available to lower income earners, ordinary home loans are never more than 95% of the purchase price, and they cannot include any registration or transfer costs. This means that people taking out these loans need to have some ready cash to pay a deposit as well as all the costs.

AccessBonds

Standard Bank also offers an AccessBond facility that enables people with home loans to deposit money into their home loan account and also transfer money out of the account into other linked Standard Bank accounts. This increases the flexibility of a home loan, for example by reducing the interest payable on the loan if you pay extra into the account. There are however limits relating to both deposits and transfers that may be made to and from a home loan account.

The Standard Bank Pledge

Standard Bank offers what it calls a “pledge” that indicates an amount they are likely to qualify for if you apply for a home loan. This enables prospective property buyers to apply for the chance to get a home loan, and then, depending on what the bank pledges, shop around for property in the relevant price range. This is not a thumb suck arrangement though because you will be required to supply income and other details when you apply for the pledge, so that the bank can make an educated estimate of what you are likely to be able to afford. Standard Bank pledges are valid for three months and need to be verified and approved once you have found a suitable property. The bank will also do an assessment of the property before agreeing to any of their Standard Bank home loans.

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Johannesburg – In terms of lending, Standard Bank is leaving other banks in the shade.

In the current straitened economic conditions, Standard has expanded its lending while other banks have clamped down on advances.

The latest DI900 Reserve Bank data for August shows that the lending market is still subdued. Growth in advances at all banks was only 0.3% compared with July. Year on year (y/y) it was 1.8%, compared with 2% in July.

Consumer retail loans, including mortgages, credit cards and overdrawn facilities, rose 3.6% y/y compared with 4.2% in July. Growth in advances in the corporate sector continued the declining trend of -0.6% in July with -0.8% in August.

An analyst says banks are under great pressure to improve the quality of their loans in a market where bad debts have increased sharply. “This is because the current cost of capital is higher than the return.”

In this environment Standard Bank is the only bank showing advances growth worth mentioning, although still from a low base. Its 4.7% increase y/y is low, but better than Nedbank’s -3.4% and FirstRand’s -0.3%.

The only category of advances showing some appreciation is mortgage loans. The average growth at all the banks was 3.1% for the month, compared with 6.2% in instalment finance and 2.3% for credit cards.

Nedbank was the biggest loser in terms of mortgages, because its market share dropped from 23.3% to 21.5% y/y. Standard Bank gained the most ground with a market share of 27.2% compared to 26.4% a year ago.

If this trend continues, Standard could soon dethrone Absa as the bank with the strongest market share in mortgages. Absa’s currently has 29.8% of the market, compared to 29.2% a year ago. Its mortgage-loan market share was above 30% pre-2008.

Standard’s focus on the home-loan market is ostensibly at the expense of riskier categories of advances like instalment finance, overdrafts and credit cards.

In the credit-card domain Standard, with its market share of 36%, is still the leader, but year-on-year growth was a negative 0.3%.

Resource: Fin24.com

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