Mortgage Bond News: 29-07-2009
ABSA: Lowest mortgage advances growth since mid-2000
The year-on-year (y/y) growth in the value of total mortgage advances by monetary
institutions (the net outstanding balance on mortgage loans at these institutions)
tapered off further to 8,2% in June 2009, from 9,4% in May, according to data
released by the South African Reserve Bank. This was the lowest year-on-year
growth in outstanding mortgage balances since July 2000, when it was 8,4%.
month-on-month basis the growth in the outstanding balance on mortgage loans was
a negligible 0,1% in June.
In the household sector, growth in the value of mortgage advances to households,
largely related to residential property, declined to 6% y/y in June from 6,8% y/y in
May and 24,8% y/y in June last year. At a level of R708,4 billion in June, the amount
of outstanding mortgage balances in the household sector had a share of 72% in
total mortgage debt in June, while having a share of 70% in total credit extended to
the household sector in June.
The residential property market slowed down further during the first half of 2009, with
house prices declining by a nominal 3% and a real 10% during this period, according
to Absa’s calculations. This was mainly on the back of adverse economic conditions,
impacting employment, household income, and housing demand and supply
conditions. Nominal house price deflation is forecast to continue in the rest of 2009,
slowing down towards the end of the year.
Consumer price inflation, at 6,9% in June, is expected to drop further, but to remain
outside the inflation target range of 3%-6% in the near term. Demands for wage
increases and wage settlement rates of well above the CPI inflation rate are
contributing to inflationary pressures. As a result, interest rates are forecast to remain
unchanged at the next Monetary Policy Committee meeting in August.
Against the background of these developments and expectations, mortgage
advances growth is expected to slow down further into the second half of 2009
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