New residential mortgage down -31.5% year-on-year in second quarter

Plummeting new mortgage loans reflect the weak state of the residential property market, but are helping to stabilise the household debt situation

The South African Reserve Bank Quarterly Bulletin was released yesterday, and confirmed the weak state of the residential mortgage market. Total new mortgage loans and re-advances granted on residential property in the second quarter fell by -31.5% year-on-year.

The new residential mortgage number is a reflection of just how sharp the activity decline in this market has been in recent times, something that is not always apparent if one casts a glance at the more moderate pace of slowdown of the average house price indices.

The list of negative forces impacting on residential property, and thus mortgage demand is well known. It includes rising inflation eating into disposable income, a rising household debt-to-disposable income ratio which along with rising interest rates has raised the debt service ratio, and a slowing economic growth situation which has started to hamper job creation and middle class income growth.

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