100% bonds boost market: ooba

A decision by banks in August 2009 to start granting 100 percent bonds has boosted the number of consumers applying for home loans, says bond origination company ooba.

Saul Geffen, CEO of ooba, said many would-be homeowners, however, would be left disappointed, as banks remained reluctant to grant the full amounts applied for.

"While the granting of 100 percent home loans is a sign of confidence in the local property market, the implications of the National Credit Act mean that consumers still have to meet the strict affordability criteria in order to qualify."

Ooba's latest statistics showed that the proportion of consumers applying for 100 percent bonds jumped to 44 percent of overall applications in December 2009, up from 18 percent three months earlier.

However, the approval rate on these applications was significantly lower, and nearly half of the bank approvals on these 100 percent bond applications were made subject to deposits, Geffen said.

"Despite the average rand value per application having remained consistent between December and January... there has been a 10.5 percent drop in the average bond size from R707,760 in December 2009 to R633,467 in January 2010."

This was due to the higher proportion of 100 percent loan to value applications and banks' reluctance to grant the full 100 percent of loan amounts applied for.

Geffen said this had contributed to the 27.4 percent month-on-month increase in the average deposit size during January.

The oobarometer price index recorded a 4.9 percent year-on-year rise in the average house purchase price in January 2010 to R830,513 from R791,552 in January 2009.

"This is the eighth consecutive month of year-on-year price increases, which clearly indicates that the property market is steadily recovering," Geffen said.

The average bank decline ratio showed an improvement of 2.1 percent.

The ratio of applications declined by one lender but approved by another, reflected a month-on-month increase of 3.2 percent in January indicating that banks were becoming more competitive for business.

"The increased competition between banks for new customers, coupled with improved demand and rising house prices should all combine to support the continued recovery of the local property market in 2010," Geffen said.