“Faced with rising interest rates and an economy that is very close to being in a full-blooded recession as well as with consumers countrywide finding it more and more difficult to meet their commitments, the banks are conscious that the risks attached to loans of all kinds have increased significantly,” says Van Alphen.
“They will, therefore, be checking even more scrupulously a whole range of factors relating to the applicant, including the security of his employment: the extent of his debts and other commitments, his credit records of the last five years or more and, perhaps the most crucial of all, the percentage mortgage bond that is required. Any evidence of reckless or irresponsible spending will make the securing of a loan still more difficult.
“In the coming year 100% loans may well be restricted to first time home buyers and very few will qualify for sub-prime loans. The vast majority of borrowers will, in fact, find themselves paying 0,5% to 2% above prime - and any applicant whose accounts show that, after paying his bond and meeting his other commitments, he has very little surplus cash will probably have to scale down his loan requirements,” she explains.
In these conditions, although this sounds self-serving, the role of the bond originator will be more crucial than ever - especially if, as every good originator does, he or she deals with all the banks to get the best available deals.
“It is important to know that origination companies offer a free pre-qualification service to potential home buyers. This ensures that the applicant avoids any disappointment in the feedback from the banks and it significantly increases the chance of obtaining a mortgage bond. The originator, who is highly experienced in this work, does all negotiations with the banks. Once the banks have responded, the purchaser will be given a choice offers/approvals.”
Among the tasks that good originators will now take on will be that of showing the applicants how to save seriously. “All too often, middle class South Africans, especially those experiencing moderate wealth for the first time, have convinced themselves that saving is simply impossible on their incomes.
"However, our experience as bond originators is that for many this is not true. If people take the decision to cut out a wide range frivolous, non-essential expenses and focus on their fundamental needs, they almost invariably discover that they can save - even in tough economic times - and, by getting on the property owning ladder, in time they end up with a highly satisfactory asset base,” Van Alphen concludes.
