Absa on Home Loan Tips - 04-02-09

April 2 - Absa, one of South Africa's leading mortgage banks, predicts that the current trend of home loan applications being rejected will continue for at least another 18 months.

This dismal news comes hand in hand with the latest statistics that only 30% of applications received by Absa's home loan division are approved.

In addition, anyone seeking to purchase a home that is too low or too high on the price spectrum will also be disappointed. Out of the 20,000 home loan applications received by Absa last month, the average price of the properties was R645,000.

Luthando Vutula, the Managing Executive of Absa's home loan section, believes that the decline rate could climb another 4% in 2009 alone.

With so many South Africans struggling to pay back their loans as result of the property market conditions, Vutula offers some sound advice and says that homeowners should do everything they can to hang on to their homes.

The first thing they should do is contact their bank to see what can be done to assist. Contrary to what people may believe, banks are not out to 'get' property owners and would much rather have homeowners retain their properties and see how they can assist with home loan term adjustments.

Extending a loan to 30 years instead of 20 years, for example, could mean smaller monthly repayments, and a better chance of paying off the loan.

If homeowners come into a lump sum of money, they should seriously consider paying off a part of their mortgage. This greatly reduces the amount they have to pay the bank back in the long run and reduces the interest significantly.

For those who haven't yet bought a home, Absa advises that sometimes letting go of a dream and looking in other areas or at smaller properties until times improve could still allow South Africans to get into the property market and build themselves up from that point when times get better.