Please note that you are using an outdated version of Internet Explorer which is not compatible with some elements of the site. We strongly urge you to update to a newer version for optimal browsing experience.

Credit amnesty looming

29 Aug 2013

There’s a credit amnesty coming and it will make it even more important for property sellers and landlords to enlist the help of qualified and experienced estate agents

Property sellers will need to be much more cautious about accepting offers on their homes and rely more on professional agents and their mortgage origination partners to ensure that prospective buyers are properly pre-approved for the home loans they would require to fulfil the transaction.

This is the word from Jan Davel, MD of the RealNet estate agency group, who says the amnesty will no doubt be welcomed by many, but will make it difficult to assess the creditworthiness of potential home buyers and tenants. 

The amnesty, proposed by the Department of Trade and Industry (DTI) and the National Credit Regulator (NCR), is expected to become law before the end of the year, and the most likely effect will be that the credit bureaux is required to remove all adverse listings relating to debts of less than R10 000 going back to 2006 (irrespective of whether these have been settled or not), as well as all adverse information about paid up debts or judgments on a continuing basis. 

It is anticipated that this will immediately apply to between 1.5 million and two million people with impaired credit records, most of them understood to be earning less than R15 000 a month. 

Davel says but in effect the most the bureaux will be able to do for anyone running a credit check on any consumer will be to provide information about current unpaid debts of R10 000 or more. 

He says credit grantors will not have access to any records of previous bad payment habits, defaults or judgments, so there will be no way for them to assess how consumers managed their debt in the past or whether they are good or bad credit risks. 

In the real estate sector, he says, this will make it all the more important for landlords, for example, to engage the services of professional rental property management agents who can help to overcome this problem by obtaining additional information such as salary slips, bank statements and access a rental payment record from the Tenant Profile Network (TPN). 

“Secondly, property sellers will need to be much more cautious about accepting offers on their homes and rely more on professional agents and their mortgage origination partners to ensure that prospective buyers are properly pre-approved for the home loans they would require to fulfil the transaction.” 

Davel says sellers can suffer considerable financial loss if they accept an offer and take their property off the market only to discover later that the prospective buyer does not qualify for the necessary bond. 

Meanwhile, he says, would-be home buyers can expect to encounter even stricter credit criteria than those in place at the moment when applying for home loans. He says this is evident from the fact that the banks have strenuously opposed the idea of the credit amnesty, precisely on the grounds that it will increase risk and could result in consumers borrowing more than they can afford. 

“What is more, they have said that their increased risk would probably have to be passed on to consumers in the form of higher interest rates on home loans and other debts – and noted that those who have worked hard to pay their debts and keep their credit records clean would likely be unfairly prejudiced in the process.”

Print Print
Top Articles
Savvy buyers can find great property options at lower prices in times of reduced confidence, and with signs of recovery and banks giving more bonds, it's a good time to buy...

While the commercial market may be slower than in recent years, it is by no means stagnating and demand in certain sectors continues to drive ongoing development.

Tourists are paying up to R4 400 per day in Cape Town’s mixed-use Waterfront and Foreshore, with visitor numbers expected to climb to 21 million by 2030. Read on...

Loading

Your browser is out of date!

It looks like you are using an outdated version of Internet Explorer.

If you are using Internet Explorer 8 or higher, please verify that your Internet Explorer compatibility view settings are not enabled.

For the best browsing experience, update to the latest Version of Internet Explorer or try out Google Chrome or Mozilla Firefox.


Please contact our Property24 Support Team for further assistance. Tel. +27 (0)861 111 724