Johannesburg - Despite banks claiming to offer 100% home loans, potential buyers are still left out in the cold by stringent lending criteria, said South Africa's biggest mortgage originator on Wednesday.

Such home loans have been offered by the "Big Four" banks since August 2009, but according to Ooba (formerly MortgageSA) banks are still reluctant to grant them.

"While the granting of 100% home loans is a sign of confidence in the local property market, the implications of the National Credit Act mean that consumers still have to meet the strict affordability criteria in order to qualify," said Saul Geffen, CEO of Ooba.

Ooba statistics show home loan applicants are taking advantage of the banks' offer - 44% of potential homebuyers are applying for 100% bonds, up 18% from three months earlier. However, the approval ratings on these bonds are significantly lower, said Ooba.

"This [100% loans] is a thing of the past," said Jacques du Toit, Absa's senior property analyst. You have to take into account broad economic situation."

According to Du Toit, the job losses, consumers' high level of debts and the drop in income mean that many home loan applicants can't afford houses.

"The banks carry the risk - not the agent or the buyer, that's why they have to be extra sure that the applicant has the ability to pay," said Du Toit.

Ooba statistics also showed there has been a 10.5% drop in the average bond size from R707 760 in December 2009 to R633 467 in January 2010.

Article by: Leani Wessels - www.fin24.com