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6th Jun 2022

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Ooba stats show competition for home loan business fierce in Q4

According to statistics from ooba, South Africa’s foremost home loan comparison service, competition amongst the major banks for a bigger share of the home loan market remained fierce during the fourth quarter of 2021 (Q4 21). Banks continued to compete for business through strong interest rate discounts, while simultaneously approving more bonds with lower deposit requirements, creating advantageous lending conditions for home loan applicants.  

Rhys Dyer, CEO of ooba, says: “The average interest rate achieved for customers measured by the oobarometer was prime less 0.21%, 19 basis points lower than Q4 20’s rate of prime less 0.02%.  Our statistics also show that second-time home buyers who, unlike first-time buyers, have access to a deposit are enjoying even more favourable rate discounts.  During 2021 the average interest rate achieved in this segment was prime less 0.42%.  These statistics show that banks are pricing more affordably, which improves approval rates from banks.   

“This is clearly shown by the 3.1% increase year-on-year in our bank approval rate for the fourth quarter. The oobarometer also shows a 1.6% improvement in the percentage of applications that are declined by one bank but approved by another.  In Q4 2021, almost 50% of applications that were declined initially by one bank were subsequently approved by another bank, highlighting the value of using a home loan comparison service to shop around for the most advantageous home loan deal,” adds Dyer. 

The oobarometer’s fourth quarter statistics show that healthy property market trading conditions prevail, with the Average Purchase Price increasing by 3% year-on-year to end 2021 at R1 389 715. The Average Purchase Price for First-time Buyers fared even better with a 4.7% increase to end the year at R1 140 749.   Whilst there has been a moderation in property price growth during the last 2 quarters of 2021, ooba’s statistics show a well above inflation Average Purchase Price growth of 9.4% during 2021, with an annual growth of 8.3% recorded in the Average Purchase Price for First-time Buyers.  This is a clear indication of buyers utilising the lower interest rates to buy larger properties. 

During the same time period, ooba’s Average Bond Size increased by 5.5% while the Average Deposit as a Percentage of the Purchase Price fell by 23.9%, once again indicating the willingness of banks to offer home loans with more favourable conditions, like lower or zero deposits. 57% of ooba’s home loan approvals in Q4 2021 were granted by banks without a deposit requirement, which is approximately 4% higher than the zero deposit lending percentage recorded in Q4 2020.  

Says Dyer: “We extracted the annual average Purchase Price growth as measured by the oobarometer per region across all buyers and first-time buyers and have noticed some interesting buying trends.  “Properties in the Free State showed the highest year on year price growth of 15%. However, this growth is off a base of the lowest average property price in the country, which breached the million-rand mark for the first time in 2021 at R1 016 189. The average property price for first-time home buyers was R891 208. 

The oobarometer shows the Average Property Price in the Western Cape was 1 898 490 for 2021, the highest in the country. However, Western Cape properties showed relatively lower growth rates of 7% overall and 6% for first-time buyers.  North West Gauteng showed the lowest growth rates of 5% overall and 4% for first-time buyers, but has the second highest average purchase price at R1 524 976 for the year.   

Dyer says: “Whilst property price growth in the Western Cape and North West Gauteng have moderated, our statistics show that the demand for luxury properties above R3m has increased.  22% of ooba’s granted home loans during 2021 fell into this luxury market, which is a growth of almost 7% since the cost of borrowing dropped significantly in May 20.  

Looking ahead at the property market in 2022, Dyer expects interest rate increases of between 0.75% and 1% over the calendar year. Given that each 0.25% increase represents an approximately R150 per month additional repayment on an R1m loan over 20 years, he expects interest rate hikes to impact property affordability, which will have some impact on demand and in-turn property price growth.  Dyer notes however that: “Even at a prime lending rate of 8%, we are still well below the level of 10% that existed when we entered into the pandemic in early 2020. 

“We thus expect the demand for new home loans to reduce by approximately 5% to 8% in 2022 compared to the record high volumes in 2021. We envisage an Average Purchase Price growth of about 3% to 4% for 2022,” adds Dyer.  

“Similarly we predict a shift in buying activity from the lower end of the market to the mid segment of the market, as the demand for home loans at the lower end of the market contract due to affordability constraints. The rent or buy calculation is expected to start shifting back towards renting from an affordability perspective, which may result in more buy-to-let investment buyers entering the market.”  

Dyer envisages ongoing high approval rates for home loans during 2022, with banks continuing to compete for new business by offering low or no-deposit lending requirements. “For this reason, it makes financial sense to use  a home loan comparison service like ooba who offers sound advice and approach all the banks  to secure the most competitive home loan at no cost to the buyer.  During the fourth quarter of 2021, ooba successfully obtained home loan finance for over 80% of its applicants” concludes Dyer.  


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