Gradual recovery in mortgage advances growth

And is forecast to continue to recover gradually during the course of the year.

Year-on-year growth in mortgage advances came in at 3,9% in February 2010, unchanged from January. This is based on data released by the South African Reserve Bank. On a month-on-month basis, mortgage advances growth was somewhat higher at 0,7% in February from 0,4% in January.

The year-on-year growth in mortgage advances to the household sector improved further to a level of 4,3% in February (3,9% in January) after bottoming at 3,6% in November 2009. Month-on-month growth of 0,9% was recorded in February, up from 0,4% in January.

Growth in total credit extended to the household sector, which includes mortgage advances, accelerated to 3,5% year-on-year (y/y) in February from 2,9% in January.

On a monthly basis, household credit extension was up by 1,1% in February from 0,5% in January.

With the residential property market having recovered during the second half of last year on the back of better economic conditions, mortgage advances growth have also bottomed towards the end of the year and are recovering gradually. However, mortgage advances statistics reflect property transactions which have taken place about 2-3 months earlier, as the flow of funds normally take place at registration of the property. The slow recovery in mortgage advances growth is largely related to the fact that households are still struggling with relatively high levels of debt, while applicants for mortgage bonds have to qualify for finance, based on banks' credit criteria and the stipulations of the National Credit Act.

Mortgage advances growth is forecast to continue to recover gradually during the course of the year, based on a further reduction in interest rates in March, while improving economic, labour market and household income conditions will provide increased support to the recovery in the property market. Year-on-year growth in mortgage advances growth is projected to remain in single digits this year.

Article from: www.realestateweb.co.za