Real Estate News - Home buyers blocked
New National Credit Act is forcing banks to turn down loans.
Home buyers are finding it harder to get loans approved
due to stricter requirements under the new National Credit Act.
Louis von Zeuner, the banks group executive director, said: The provisions of the Act require changes to both the process of applying for credit and the forms associated with credit application.
In terms of whether or not weve seen an increase in the number of declines in the weeks since the Act came into effect, the answer is yes, we have.
The Acts more stringent criteria mean that banks have to delve deeper into prospective clients credit histories.
Von Zeuner said: In addition to existing credit obligations, the bank also looks at all a customers monthly expenses, including things like school tuition, investment contributions, insurance payments, groceries, utility bills and service agreements.
A number of people who would previously have been given loans are now being turned away.
An agent from Mortgage SA said bond originators were becoming nervous about getting their clients home loans.
The agent said: The business is there but banks are declining many people. The process is much slower now and we are seeing backlogs because banks are taking longer to process information.
Property economist Erwin Rode said: In the longer run, the Act will help prevent a bubble situation in future years, so we must take the pain there is at the moment.
He said it was never a good thing to give credit to people who cant afford it especially at the top of the (house price) cycle.
Harry Nicolaides of Pam Golding said the Act would not have a long- term effect on the property market.
Article from: www.sundaytimes.co.za