Balancing the budget between household credit vs mortgage

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This was the net result of lower growth in household unsecured credit balances and growth in secured credit balances that was somewhat higher, supported by an increase in the value mortgage balances. Growth in the value of household secured credit balances (R1,086.5 billion at end-April and 76% of total household credit balances) came to 3.3% year-on-year (y/y) at the end of April, slightly up from 3.2% y/y at end-March. Secured credit balances growth up to end April was underpinned by improved growth in mortgage balances (77.3% of household secured balances), whereas growth in instalment sales balances (22.4% of household secured balances), slowed down to 5.8% y/y from 6% y/y at the end of March.

Household unsecured credit balances, with a value of R343,2 billion and a share of 24% in total household credit balances at end-April, recorded growth of three, 4% y/y at the end of the first four months of the year, which was the lowest year-on-year growth in any month since February 2010. This was the result of a drop in growth in the largest component of unsecured credit balances, namely general loans and advances (60.8% of household unsecured balances), to 2.9% y/y at end-April from 3.7% y/y at end-March.

Outstanding private sector mortgage balances, consisting of commercial and residential mortgage loans, registered growth of 4.9% y/y at end-April, up from 4.7% y/y at end March and 4.4% y/y at end-February. The further uptick in private sector mortgage balances growth was the combined effect of continued double-digit growth in corporate mortgage balances (28.8% of total private sector mortgage balances) and somewhat faster growth in household mortgage balances (71.2% of total mortgage balances) at end-April.

Growth in the outstanding value of household mortgage balances increased marginally to 2.8% y/y at the end of April influenced by a month-on-month rise of almost R2 billion and a relatively low base of calculation a year ago. The value of outstanding mortgage balances is the net result of all property transactions related to mortgage loans, including additional capital amounts paid into mortgage accounts and extra monthly payments above normal mortgage repayments. Factors such as the state of household finances, credit-risk profiles, consumer confidence, inflation and interest rates will remain important regarding the demand for credit. Headline consumer price inflation is forecast to rise in the rest of the year, with interest rates to be hiked before year-end and through 2016, which will contain growth in household credit.