Banks may well have started opening their mortgage lending taps again but the average homebuyer still needs to fork out a cash deposit of close to 20% of the property’s purchase price.

Latest data from mortgage originator ooba show that in July the average deposit required by the major banks was 19,4%, translating into a relatively hefty cash pile of R165 260 if ooba’s current average house price of R850 763 is used as a benchmark.

Although banks’ deposit requirements have declined over the past 12 months, from an average 23,6% to the current 19,4%, these levels are still nowhere near the 0% to 5% deposits typically required by banks during the boom years from 2004 to 2008.

Absa Home Loans Managing Executive Luthando Vutula said earlier this week at a media briefing in Johannesburg that the bank still wants to encourage prospective homebuyers to save for a deposit. Absa, who is the biggest player in the South African home loan sector with a market share of 31% and a total mortgage book of R308 billion, earlier this year still required deposits of at least 15% on most transactions.

Vutula said Absa remains ``very cautious`` in its lending policies but has nevertheless relaxed its deposit requirements somewhat in recent months. ``Gone are the days of a one size fits all solution. Loan-to-values of between 90% and 100% are therefore available to selective buyers.’’

Latest figures from property data service provider Lighthouse show that although the banks are starting to lend again, volumes are still down 60% from their 2007 peaks. The total value of mortgage loans approved is currently at around R8 billion/month, down from around R20 billion/month in 2007.

Andrew Watt, executive director of Lightstone, said at Rode & Associates’ annual property investment conference held in Johannesburg on Wednesday that sales in execution notices relating to bank repossessions are currently at record highs.

Watt said distressed properties are being sold at 30% to 50% below market value, which means that banks are still sitting with plenty of home loans on their books that are in negative equity. Said Watt: ``This is an obvious problem for mortgage lenders. Thus banks will continue to manage their net equity positions tightly.’’ - Joan Muller

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