The new Credit Act has brought the whole home marketing industry to a standstill , says Tony Clarke, MD of Rawson Properties '“ but, he adds, it is likely to make the banks fight harder for the available business and that will benefit bond applicants in the long run.
'I cannot agree with the bank spokespeople who have said that it is 'business as usual' and nothing has really changed. Our experience has been that the banks are not yet geared up to apply the new Act and this is causing delays. The approval hit rates of certain bond originators have, we know, been significantly cut '“ in one agency the number of approved loans this month has dropped to 1% of previous months'
Clarke said that bank staff appear to be interpreting various clauses in the Act differently and this is causing confusion amongst agents and mortgage bond originators as to what the correct procedure should be.
'There is as yet little consensus on how certain clauses in the Act should be applied. The good news, however, is that we expect the tougher lending conditions to lead to an all-out advertising and promotional campaign in which the banks vie with each other in the same way as the motor manufacturers to offer alluring, even gimmicky, packages such as two or three months bond repayment relief or free insurance. Down the line this will work to the benefit of bond applicants. Applicants with no credit problems and ample resources will be in a particularly strong position to negotiate advantageous deals, including preferential interest rates'
As predicted, said Clarke, the new ruling that all debts and all credit facilities have to be listed by the bond applicant is causing difficulties because credit investigators are sometimes misinformed.
'We have already come across cases where applicants cannot remember all their credit facilities because they have fallen into disuse. We have also had cases where a minor unpaid debt dating back many years has resulted in a bond refusal. It is worrying that credit records are quite frequently inaccurate, listing, for example, debts on motor cars that were in fact paid in full'
Clarke added that it looks as if some banks are now raising their valuations, insurance and administrative fees by very significant amounts.
Bond applicants, he said, must shop around and ask questions before signing on for the first bond offered them.
Another problem encountered has been that 'squeaky clean model clients' who have shunned debts, HP store accounts and the like may now find it difficult to get a bond '“ because they have no credit record for the banks to check.
In the long run, said Clarke, the new Credit Act will be beneficial because it will force people to reduce their credit facilities and their debt and start saving.
'South Africa is trying to foster a culture of home ownership rather than renting. These moves are a step in the right direction '“ but it is now clear that home selling is going to be harder this year. It will take time to adapt to the new system'
