Based on credit data released by the South African Reserve Bank, the total value of outstanding mortgage balances at monetary institutions, which includes both commercial and residential mortgage loans, increased by 3.4% year-on-year (y/y) to R1 021,4 billion in May 2010. Year-on-year growth of 3,6% was recorded in April this year. On a month-on-month basis, outstanding mortgage balances was up by R3,5 billion, or 0,3%, in May from April.

Year-on-year growth in the value of households' outstanding mortgage balances was higher at 4,8% in May after increasing by 4,4% in April. Month-on-month growth came in at 0,4% in May, taking the value outstanding mortgage balances in the household sector to R742,1 billion.

Total credit extended to the household sector, consisting of instalment sales agreements, leasing finance, mortgage advances, overdrafts, credit card debt and other loans and advances, was higher at 4,4% y/y in May this year after rising by 3,8% y/y in April. On a month-on-month basis the value of credit extended to the household sector was up by about R4,4 billion, or 0,4%, to an amount of R1 057,9 billion in May.

The abovementioned trends in household credit extension as well as household mortgage advances indicate that conditions with regard to household finances are gradually improving, However, some further job losses occurred in the first quarter of 2010, while the ratio of household debt to disposable income remained relatively high at 78,4% in the quarter. These are factors which will continue to influence the growth in credit extension to the household sector in the rest of the year.

Against this background, mortgage advances growth is forecast to gradually improve further towards the end of the year, but growth is still expected to remain in single digits this year.

*Jacques du Toit is a senior property analyst at Absa Home Loans

Article by: Jacques du Toit - www.realestateweb.co.za