Want a home loan? An originator can double your chances of approval.

Shaun Rademeyer, CEO of BetterLife Home Loans, SA’s biggest mortgage originator, notes more than half (52%) of the home loan approvals currently being achieved are the result of an application being “rescued” by a reputable originator after being turned down by at least one financial institution.

“And on top of that, a quarter of all applications are being declined outright by all the banks, which means that the chances of a loan being approved without help from an originator are now well under 40%, compared to our 75% approval rate.”

Meanwhile, higher interest rates are finally beginning to have an impact on housing demand, with the overall number of home loan applications showing a 5% drop in the 12 months to end-April, with the overall value of home loan approvals having fallen by almost 4% over the same period.

“Most of this decline has occurred in the past three months, as the January and March rate increases started to affect household budgets. This is especially evident in the first-time buyer sector, which tends to be more credit-dependent than the repeat buyer sector.”

With debt repayments up across the board, Rademeyer notes that the 20 to 35-year-old buyers who make up most of this sector are finding it extremely hard to save for a deposit on a home, with the average deposit required by a first-time buyer now being around R83 000 – or almost 9% more than at this time last year.

“At the same time, the banks are becoming more cautious about lending into this sector, with the result that first-time buyers currently account for just 29% of all home loan approvals, and 23% of the value of those approvals.”

What this means is that repeat buyers are currently the dominant force in the market – although even in this sector, consumers are clearly trying to contain their monthly expenditure, as evidenced by the rising number of repeat buyers who are intent on downsizing to smaller, more manageable homes with lower operating costs.

“However, we must note that these smaller homes are not necessarily cheaper homes. In fact, our statistics* show that the average home purchase price has risen just over 10,5% in the past three years during which the downsizing trend has been clearly evident.

“Even more interesting is the fact that over the same period, the average cash deposit amount paid has risen by almost 14%, which would seem to indicate that repeat buyers are not only intent on lowering their monthly home running costs such as property rates, utilities and maintenance, but encouragingly, also keen to keep a lid on their monthly home loan instalments by paying bigger deposits upfront.

“This is a prudent measure that also helps to protect buyers against financial shocks, and bodes well for the stability of the SA market which will most likely have to weather several more interest rate increases over the next 12 to 18 months.”

*The BetterLife Home Loans statistics represent 25% of all residential mortgage bonds being registered in the Deeds Office.

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