Mortgage advance growth in decline

Growth in the value of outstanding residential mortgage advances is expected to continue its decline until well-into 2008, ending the year significantly lower at 17% year-on-year (y/y) from a current 27.3% y/y, says FNB property strategist, John Loos.

He adds, however, that commercial mortgage growth should end 2007 still above 30%, reflective of the strength of demand growth for commercial space as economic activity rises.

Loos was commenting after the release of the monthly DI900 breakdown, which provides insight into the credit extension breakdown and comes out around two weeks after the headline credit extension release.

The latest DI900 data showed the expected trend - that residential growth was taking strain under the weight of 250 basis points of interest rate increases since June last year.

For the banking sector as a whole, the data showed total mortgage advances growth had slowed further from 28.3% y/y in March to 28.0% in April. The residential component growth slowed to 27.3% y/y from 27.8% in March.

Commercial mortgage growth by comparison, remained above the overall mortgage growth rate at 31.9%, and was a slight improvement on the 31.5% of March.

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