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PROPERTY: Home Loan Applications Drowning in NCA Red Tape


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Home loan applications are still not being approved as readily as they should be, given banks’ public commitments to reopening the credit taps for property and this year’s cuts in interest rates.

“The real estate industry is waiting in vain for the much heralded easing,” says Henry Lee of CENTURY 21 Prime Properties which markets in the Alberton area, arguably one of the most representative property markets.

“Bond application approvals have improved and probably around 75% are being accepted but not to the 100% levels claimed by the banks, and beyond the R1m mark, deposits of 10% are still needed in most cases,” he adds.

“Also the lower and elite segments of the market are seemingly receiving preference while mid-range approvals are harder to obtain, which means an important segment of the market is not in the picture.”

Tamara Nettmann of CENTURY 21 Lifestyle Team, says it appears that bond applications are often being evaluated by inexperienced bank employees. “At our level, the credit-worthiness of an applicant is not always clear cut and we need greater expertise in this respect,” she says.

Accepting that the banks are giving priority to clearing their repossessions backlog, the situation nonetheless begs the question of whether the National Credit Act (NCA) needs to be reconsidered.

The NCA governs all credit approvals including home loans, and information that must accompany applications includes salaries earned, pension and PAYE payments, medical aid premiums, rates, taxes, levies and UIF contributions.

Also required are such household budget details as domestic workers’ wages, garden services, travel costs, insurance payments and funeral policies as well as retirement annuities, timeshare commitments, monthly grocery costs, clothing expenses, telephony costs, TV licenses, DStv, vehicle costs, furniture and fittings and investment costs, even alimony payments.

“Finally, you have to include the market value and liabilities for fixed property and any other assets and liabilities, so purely on the grounds that all this is overly onerous, there would seem to be a case for easing,” says Gray.

“The NCA is arguably the toughest credit legislation in the western world and even extremely creditworthy individuals by any standard have seen their bond applications turned down. It’s time for a reality check.”

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