Home loan re-advances hit record highs

Home Owners are beginning to take advantage of the value their properties hold following the recent property price increases.

Home LoansAccording to a report by Fin24.co.za Annual growth in mortgage re-advances hit an historic high of 30% in March.

Brait economist Colen Garrow believes this is data that could swing the Reserve Bank’s interest rate cycle.

The Bank already hinted recently that the next move in interest rates may be up, warning borrowers and lenders that the benign environment for high levels of household debt may not last.

“Interestingly”, says Garrow, “growth in mortgage advances is at odds with growth in house prices.

“Absa’s House Price Index for April slowed to 12.8%, from 13.7% the previous month. While growth in house prices has slowed, the distinction is that no price deflation – where nominal prices fall – has been registered.”

Garrow also singles out soaring household debt as a factor weighing in favour of monetary tightening.

“At 65.3% of disposable income, household debt levels may be manageable by developed market standards. But, the Reserve Bank is taking no chances, erring on the side of caution, warning that ‘the next movement in rates may be higher, not lower’,” says Garrow.

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