Estate Agent Institute chairman says a change of attitude by banks on mortgage bond lending is now essential

How much longer will the banks remain impervious to the ongoing criticism from estate agents, homebuyers and sellers that they are wrecking the residential property industry?

This is the question many will be asking after hearing Ivan Neethling’s, Chairman of the Western Cape branch of the Institute of Estate Agents, latest report on the frustrations now being experienced by agents due to the drastically small number of bond applications being passed.

Neethling said that although the banks “on the whole” appreciate how difficult they are making it for people to buy homes with bonds (in some areas 90% of qualified buyers needing bonds are being rejected), they are justifying their attitude on the grounds that the global money crisis as yet shows no sign of levelling off and in so volatile a situation it could be risky to give credit.

“Tito Mboweni’s statements that a recovery could take three to five years and that the economy is experiencing further shrinkage and is now technically in a recession due to negative growth continuing into a second quarter, have,” said Neethling, “given the banks further reasons not to act.”

Extrapolating on what he has said previously on this subject, Neethling said that the State is now speaking with two voices – one giving the pessimistic Reserve Bank view and one expounding the Minister of Finance’s always positive outlook – which includes the latest prediction of continued growth for the coming year, much of it fuelled by the Ministry’s funding of the Public Works Programme.

His own view, said Neethling, is that the banks’ reluctance to approve bonds “makes no sense at all” because the latest figures show that South Africans are not over-borrowed and that under the NC Act regulations there is now minimal chance of a poor credit risk applicant getting a bond.

“With further interest rate drops of 2% or more now essential – and likely – the big question is whether the banks’ attitude will continue to embody the negative view of the SA Bank (which many feel is dragging down the economy) or the more positive attitude of those who are calling for the State to provide an economic stimulus.

“If the housing sector is to remain a catalyst for economic growth and a means to empower its people, we desperately need a change of attitude from the SARB and SA’s big banks.”

Article by: