ABSA tightens credit requirements

Home Loans News

ABSA’s CEO, Steve Booysen, has announced that they will be tightening there lending criteria ahead of an expected increase in interest rates.

Absa Home LoansIf the other Sa Home Loan providers follow Absa’s initiative we could see a decease in property prices, which have enjoyed an raise of about 20% since the beginning of 2005.

According to the Business Day, Absa will be particularly wary of financing building loans.

With lending rates at it’s lowest in 25 years there has been a dramatic increase in South Africans who are getting into the so-called buy-to-rent market. Often these people buy homes even before they are built with the intention of renting them out.

In an interview in Mozambique, Booysen explained that in a normal market only 5% of buyers would Buy-to-Rent. Currently, that figure is at 20%.

“If there are too many investors, it becomes more competitive as there are more units available to rent. That pushes down the price,” Booysen said.

The prime lending rate is expected to increase towards the end of next year. But, added Booysen the average house prices may only begin to fall if the Reserve Bank decides to increase rates by more than two percentage points.

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