SOUTH Africa’s big banks are taking longer to deal with home loan defaulters even though they are continuing to reduce their non-performing home loan books from 2009-10 peaks‚ say industry players.
Standard Bank home loan head Steven Barker said last week that although the bank’s percentage of non-performing loans fell from 6.2% to 4.9% of total advances in the year to June‚ the reduction rate has not been as rapid as hoped. He said it could become more difficult to deal with distressed clients who have not yet been worked out of the system.
“We are finding it quite challenging to manage the remainder of our non-performing loan book as most are legal matters that have gone the sequestration or repossession route and are taking longer to settle than we had hoped,” he said.
Barker believes it could take at least two to three years to get rid of South Africa’s overhang of distressed properties‚ given the worrying state of consumers’ financial positions.
According to the National Credit Regulator’s latest Consumer Credit Market Report‚ about 75000 homeowners were in arrears on mortgage repayments (for more than three months) in June.
These defaulters’ mortgage debt totalled R41-billion‚ about 5.2% of total home loan advances of R799.41-billion.
Figures released by the individual banks for their June financial reporting periods confirm a default level of 4% to 6%. That is a marked improvement on the 10%-plus reported by banks in 2010 but still around double pre-crisis levels.
Standard Bank’s research indicates that sales volumes are about 33% down on 2006-07 levels.
“This could well be the new normal for the South African housing market‚ something the industry will have to adjust to‚” Barker said.
First National Bank (FNB) home loans chief executive Jan Kleynhans expects the bank’s 21% rate of reduction of non-performing loans in the 12 months to June to continue for the next year.
He concedes that a slowdown is likely thereafter‚ as the remainder of loans – mostly debt-counselling and insolvency matters – are likely to take longer to work out of the system due to the legal processes involved.
Kleynhans said it would probably take 18 to 24 months for FNB’s non-performing loan book to return to normalised levels of about 2% to 3%.
However‚ he said demand for residential property was unlikely to improve in the near term‚ given South Africa’s fairly low economic growth rate and “persistent and relatively high” household debt levels.
Property economists are equally bearish about house price growth.
Absa senior housing analyst Jacques du Toit and FNB property strategist John Loos said they expected a slowdown in growth in the next 12 months. — I-Net Bridge
Home loan default issue lingers
Standard Bank home loan head Steven Barker said last week that although the bank’s percentage of non-performing loans fell from 6.2% to 4.9% of total advances in the year to June‚ the reduction rate has not been as rapid as hoped. He said it could become more difficult to deal with distressed clients who have not yet been worked out of the system.
“We are finding it quite challenging to manage the remainder of our non-performing loan book as most are legal matters that have gone the sequestration or repossession route and are taking longer to settle than we had hoped,” he said.
Barker believes it could take at least two to three years to get rid of South Africa’s overhang of distressed properties‚ given the worrying state of consumers’ financial positions.
According to the National Credit Regulator’s latest Consumer Credit Market Report‚ about 75000 homeowners were in arrears on mortgage repayments (for more than three months) in June.
These defaulters’ mortgage debt totalled R41-billion‚ about 5.2% of total home loan advances of R799.41-billion.
Figures released by the individual banks for their June financial reporting periods confirm a default level of 4% to 6%. That is a marked improvement on the 10%-plus reported by banks in 2010 but still around double pre-crisis levels.
Standard Bank’s research indicates that sales volumes are about 33% down on 2006-07 levels.
“This could well be the new normal for the South African housing market‚ something the industry will have to adjust to‚” Barker said.
First National Bank (FNB) home loans chief executive Jan Kleynhans expects the bank’s 21% rate of reduction of non-performing loans in the 12 months to June to continue for the next year.
He concedes that a slowdown is likely thereafter‚ as the remainder of loans – mostly debt-counselling and insolvency matters – are likely to take longer to work out of the system due to the legal processes involved.
Kleynhans said it would probably take 18 to 24 months for FNB’s non-performing loan book to return to normalised levels of about 2% to 3%.
However‚ he said demand for residential property was unlikely to improve in the near term‚ given South Africa’s fairly low economic growth rate and “persistent and relatively high” household debt levels.
Property economists are equally bearish about house price growth.
Absa senior housing analyst Jacques du Toit and FNB property strategist John Loos said they expected a slowdown in growth in the next 12 months. — I-Net Bridge
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