The SA Home Loan Rangers

Home Loan News

The founders of three of South Africa largest mortgage originators were recently interviewed by FinWeek magazine.

The cover story entitled ‘Loan Rangers’ explains how mortgage originators have become an important part of the home loans market. Their influence on this industry has been so dramatic that they are being credited for so many homeowners now enjoying interest rates of as much as 2% below prime.

In only five years originators such Mortgage SA, PA BetterBond and Bond Choice have completely revolutionized the home loan application process.

Previously, individuals were forced to deal with the large banking institutions personally, and without any knowledge of how home loans work or how interest rates affect a mortgage, these individuals were powerless. Mortgage Originators are putting the power in the customers’ hands – where it should be – forcing the home loan providers to reconsider their service levels and products.

FinWeek Magazine reports that over the past 12 months home loans worth around R115bn have been granted through mortgage originators, which is about 70% of the total growth of SA’s Big Four banks’ mortgage advances.

The first originator to appear in South Africa was Saul Geffen’s Mortgage SA, in 1999. Two years later there were at least 20 different originators in SA.

Geffen explains why Mortgage SA has become so successful: In 1999 SA’s residential property environment looked decidedly different than it does today. Interest rates were around 24%, banks were struggling with low business volumes and high fixed costs. All the participants were looking for a way to reduce fixed costs and increase revenue. Combined with the fact that there was no service model for consumers when applying for home loans, the market was right for this kind of service. Mortgage origination offered a strong value proposition to consumers and banks.

Radio 702’s Bruce Whitifield, interviewed Geffen after reading the FinWeek article. A transcript of the radio interview can be found here.

When asked where the idea of mortgage origination came from Geffen explained, “Mortgage origination and the facilitation of mortgage applications is common practice in many international countries. Mortgage origination started in South Africa based on real estate and relationships with banks. It wasn’t imported from another country, it stemmed out of the environment that we had in the 1999 era.”

Originators appeared very suddenly in South Africa but they are definitely here to stay, their influence has come as a result of their ability to offer consumers what they are looking for – a single contact point that offers great service and access to all the major home loan providers.

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