"Our August figure appears to have been fairly typical in the industry as many bond originators are reporting that they have now received the highest level of applications since 2007," said Mike van Alphen, national manager of Rawson Finance. "There is clearly a growing demand for home ownership and an increasing appreciation of its inherent financial advantages. However, the whole bond application process is being held back by the financial difficulties experienced by many South Africans, as a result of the rapidly rising cost of living and the increased home prices which are now starting to rise month-by-month. These factors make saving the required deposit and the ancillary legal and transfer costs very difficult."
Just how burdensome the extra costs can be, can be seen from the amounts involved in buying a R1 million home. "The buyer of such a home would almost certainly have to find at least a R100 000 deposit. He would then also be faced with raising R28 000 for transfer fees and R11 300 for bond registration fees."
In the circumstances it is not surprising that the call for 100% bonds is now higher than ever before. At the moment, a large percentage of the 100% bonds awarded are to those couples whose combined income is below R16 500 per month and who are buying in what is known as the 'affordable housing' bracket. To these people the banks, in terms of their Memorandum of Understanding with the government, have accepted that they have a strong commitment.
Those requiring 100% bonds who are struggling to find the necessary extra cash can sometimes obtain additional funding by means of collateral security - usually with the help of a relation or an employer. In this type of deal, he said, the security provider assigns the right to the bank to take over the agreed sum if the bond holder does not meet his obligations. However, the sum pledged stays in the owner's name and he continues to collect all the interest and benefits on it. "In effect, therefore, collateral security means that the bank increases its loan to the applicant by the extra secured amount," said van Alphen.
"Despite the near-recessionary conditions we are experiencing in South Africa, it would appear that the demand for home finance continues to rise. The best advice that I can give applicants is, firstly, to clear up their credit records thoroughly and, secondly, to start saving rigorously for the deposit and the ancillary costs."
