Absa Shows Loan Advances Down Even Further - 11-04-08

November 4 - Not since 2004 has the growth in mortgage advances been so slow, according to Absa, one of South Africa's leading home loan groups.

Absa said that data released by the South African Reserve Bank showed that growth dropped from August's 17.6% - the lowest it has been since May 2004.

Absa said a general slowdown in the residential property market has led to the major decline in mortgage advances to this sector, which tapered off to a year on year growth of 20% in September.

According to Absa, the nominal house price growth dropped to only 1.5% year on year in September, 2008 - the lowest it has been since 1992.

With regard to the outlook on the inflation rate, Absa said that it is foresees a gradual decline during the next year due to a number of factors, including base factors and a slowing economy.

"Against this background, the Reserve Bank is expected to leave interest rates unchanged up to the second quarter of 2009 when a rate cut is forecast," said Absa. "In view of these developments and expectations, mortgage advances growth is forecast to continue to slow down towards the end of the year as a result of the interest rate cycle, the impact of the National Credit Act, the tightening of credit criteria by banks and the severe financial pressures consumers are experiencing in general."

The country's total mortgage debt, comprising of residential and commercial mortgages, currently stands at R681.2 billion, of which the residential sector makes up over 72%.