Duty relief boosts demand for mortgages
Mortage advances by the financial sector increased 30,05% year on year last month, marking the highest growth to date, and this has been attributed to February’s transfer-duty relief, says the Reserve Bank.

Several experts say the transfer duty relief has boosted the demand for home loans on a short-term basis. First National Bank property strategist John Loos said the slight growth in March and April could be due to the short-term boost in demand from the transfer-duty relief announced by Finance Minister Trevor Manuel in February. Manuel removed transfer duty from houses costing less than R500000. He said the “demand stimulus” may last for another few months.

Absa bank senior economist Jacques du Toit said the mortgage- advance growth rate was 28,8% in September last year, and declined to 27,4% in January this year. Since then, it had increased substantially. He said he believed it was only peaking now.

Du Toit said the technical factor of the smaller bank’s home-loan book, which was bought by a nonfinancial institution in February last year, and transfer-duty relief may have contributed to high year-on-year growth. “I think it will move to lower levels for the rest of the year.”

Property economist Erwin Rode, of Rode and Associates, said he could not help wondering to what degree the mortgage-advance growth had been boosted by consumers “using their mortgage bonds as ATMs” to finance consumption and products such as vehicles. “A mortgage bond is the cheapest finance vehicle for the man in the street so this kind of growth surely must be worrying the Bank,” Rode said.

Du Toit said the Bank’s monetary policy committee would decide next week on the way forward for monetary policy and interest rates.“They will probably be concerned about the still strong demand for credit in the economy, especially mortgage credit, as this component currently comprises 46,2% of total credit extension to the domestic private sector,” he said.

Article By: Nick Wilson - www.businessday.co.za