Growth in secured lending at an all-time high

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"We are pleased to note that the report, which focuses primarily on positive growth in the secured lending sector, has revealed that 90.62% of mortgage payments are up to date," explains Wikus Olivier, debt counsellor at DebtSafe.

"However, we still have some concerns over the financial health of the South African consumer, particularly as latest figures show that 48% of unsecured credit accounts are in arrears. This continued - albeit slowed - growth highlights the significant impact that unsecured lending is still having on consumers."

Olivier describes the 7.6% growth reported within the secured lending sector as an encouraging and positive sign. "The credit amnesty, which ran from 1 April to 31 May of 2014, most likely had a significant impact on consumers' ability to qualify for secured credit," he says. "These figures also indicate that more people are utilising their credit facilities to build assets, which is a healthy trend."

Low interest rate

He explains that the continuing low interest rate environment has also contributed to the continued growth of banks' mortgage books, in spite of the financial crisis and tightening of lending criteria. "Many consumers view low interest rates as a good time to buy; however, in order to continue benefiting from this, signing a fixed interest rate agreement is essential.

Olivier predicts, however, that the current interest rate cycle will see increases over the next six months, which will negatively impact this growth trend. "We expect to see the rate of mortgage growth decrease as consumers are subjected to the rising cost of servicing their bonds due to further rate hikes."

In contrast, the NCR has also reported on the slowed growth of the unsecured credit sector. "Although encouraging, this relatively small increase of 2% is still a cause for concern," Olivier says. "The continued growth in this sector, albeit marginal, reflects the fact that consumers are still not saving enough cash to cover their day to day expenses. Instead, consumers are having to make use of unsecured credit services to make it through the month.
"These types of loans carry disproportionately large interest rates, which are putting consumers under huge pressure, and often kick-start negative debt spirals."

Long way to go

Olivier says that although recent reports on secured lending seem encouraging, there is still a long way to go in rehabilitating South Africa's consumer credit status. "When considering SA's overall credit scenario, we have close to 22 million credit-active consumers, with approximately 80 million accounts," he says. "Shockingly, 21 million of these accounts are impaired, and out of the 22 million credit consumers only 55% are in good standing."

With nearly half of the population holding impaired credit records and excessive debt, Olivier insists that education on proper personal finance management is more crucial than ever. "There are practical and manageable steps that can be taken, particularly with the guidance of professionals, which can lead to successfully overcoming debt and repairing your credit profile. It is possible to significantly improve the current consumer debt scenario in South Africa and, with the right measures taken, for many to avoid debt altogether."