Recently it has been said than more and more bond originators are charging clients with extra costs, which is illegal. This shocked me as I realized then, that this is something that happens often in South Africa.

Anthony Smook, managing director of a mortgage loans said that, in the recent weeks he had come across three cases where origination consultants are invoicing clients for fees to obtain a bond for them.

Legally, the only way when a bond originator is able to charge their clients for extra fees, is when the bank is not paying any commission to the bond originator. The Bond Originator then has to put this into writing before he/she goes through with the application. If he does not then the applicant should demand to know why not.

So whenever you are applying for a home loan, be sure to ask the necessary questions to your bond originator so you don’t get ripped off like a lot of the other people out there.

If you need more questions on the subject you can contact SecuBond at 086 111 5024 ext 101

It seems like getting you home loan accepted in South Africa has just became much more difficult! Certain factors that contributes to this is of course the rising interest rates and the National credit act.

Bond Originator, ooba said that over 50% of the home loan applications were rejected by the banks last month (June 2008), up from just over 40% of applications made last year.

One should keep in mind that, while some applications gets rejected by certain banks, other banks does accept it sometimes. So it doesn’t mean that when one bank declines your application, other banks will not.

At the moment it looks like only FNB and Nedbank are still granting some 100% loans with other banks requiring deposits of between 10% and 20%.

It has been reported that South Africa is still the 10^th best performing property market in the world. Last year, when South Africa was the sixth biggest property rising market in the world, it was at a rise of 13,6%. This year, we are placed, number 10 in the world with a property market rise of 8,8%.

However, South Africa’s is not the only country which has shown a decrease in inflation rising. Apparently some of the countries also mentioned here include the likes of the UK, Canada, New Zealand, and Norway.

Global house price inflation came to an average 6,1% in first quarter 2008, down from 9,8% last year.

A small white lie in real estate loan application constitutes mortgage fraud, and it’s certainly a big concern and with increasing fraudulent document registration by lenders, brokers or borrowers it becomes essential for both parties to escape themselves from going to be the next victim of mortgage fraud. False assess of the value of the property to inflate the lending amount or any kind of misrepresentations regarding income or employments are some common ones.

Taking a hard look of the incomplete mortgage loan, any penalty provisions, hidden cost, need of credit insurance, direct contact with lenders for deal verification or transaction are certain things that needs to be carefully considered prior to the execution of the mortgage deal.

South African consumers should brace themselves for possibly the toughest time in 10 years — and economists warn that it is likely to get a lot worse before it gets better.

Nine successive rate hikes, soaring fuel, food, electricity and water prices have taken their toll on a broad sweep of society — from the poorest to middle-class property owners, and even small businesses.

Signs that consumers are not coping include:

• Nearly 2000 properties across the country are being auctioned each month;

• Some property sellers are so desperate they are settling for as little as half their asking price; and

• Vehicle repossessions have shot up by 25% — one bank took back 1400 vehicles in the first two months of this year.

The financial crunch will only be exacerbated by Reserve Bank Governor Tito Mboweni’s promise of yet another interest rate hike on Thursday.

Economist Mike Schussler warned: “It’s going to get a lot worse before it gets better — it’s difficult to say how much worse.”

Schussler added that if oil prices continued to hover around current levels — yesterday crude prices posted their biggest one-day gain ever, rising 11 a barrel to above 139 — the situation could rival the late ’80s — when economic conditions were even worse than the economic shock of 1998.

Christa Chidrawi, executive director of Lifeline, said there had been an increase in people seeking help due to financial difficulty, some of whom were on the verge of suicide.

“Middle-class people (who) have built up something in the past few years are suddenly being exposed to the position that they may lose quite a number of those assets,” Chidrawi said.

Anticipating Mboweni’s announcement of a further rate hike on Thursday, financial institutions have warned struggling consumers to seek help before losing their homes and cars.

Although the current interest rate of 14.5% is nowhere near the 1998 high of 25%, it is having a greater impact on consumers, said FNB property strategist John Loos.

Consumers’ ability to weather higher interest rates is far lower now than it was in the ’90s, given that households generally have higher levels of debt now, Loos added, pointing out that the debt-to-income ratio has risen to 78% from 58% 10 years ago.

Three months ago household debt stood at R952-billion, and consumers are further burdened by soaring food and transport prices.

The petrol price has almost doubled in the past year, and many motorists are struggling to meet the cost of simply getting from home to work and back.

It now costs R627 to fill up a BMW325i — a middle-class favourite — R160 more than in January. A diesel-powered Land Rover Freelander costs R734 to refuel, R241 more than six months ago.

In the past six months, the cost of refuelling a Toyota Yaris has risen by R100.

Fuel Retailers’ Association chief executive Peter Morgan said his Mercedes-Benz cost R740 to fill up, so he put R300 worth of petrol in his tank twice a week because “it feels better”.

Morgan said many motorists were no longer filling their tanks, asking instead for “R100 and R200 worth” when they pulled into garages.

Supermarket giant Pick n Pay yesterday put the price of an extremely basic food basket of brown bread, maize meal, chicken, sugar and milk at R186 a week. For a breadwinner domestic worker earning the legal wage of R1067 a month, this is nearly 70% of pay.

Pensioner Ros Carroll, 72, from George in the Southern Cape, shops with her calculator in hand as her R600 allowance for groceries does not stretch that far any more.

Reunert Kharivhe, an accountant who runs a debt counselling agency in Johannesburg, said only 15000 people had applied for counselling at the country’s registered 362 service providers.

This figure should be much higher, considering the level of debts in South Africa, said Kharivhe who sees, on average, 60 new consumers a month. Martin Feinstein, managing director of the Business Place and who is also on the board of the Small Enterprise Development Agency, predicted 18 to 24 months of “hell for small businesses”.

Feinstein said the massive surge of personal debt incurred prior to the National Credit Act was now coming home to roost, with debt servicing now one of the top expense items.

“People will cut their own hair, do their own garden maintenance and that dent in the car that would have been fixed a year ago will now just be ignored,” Feinstein added.

Last month estate agents and auction houses confirmed there had been a substantial increase in the number of small businesses for sale, ranging from franchised restaurants to construction companies.

Ferdie van Greunen, a senior broker at Aldes, the largest business broking company in the country, recorded 250 business sales in Gauteng alone in December. According to Aldes data, 40% of these businesses were supermarkets, bottle stores, butcheries and petrol stations and another 20% were restaurants and fast-food outlets.

Aucor Auctions managing director Shannon Winterstein said vehicles ranging from old Toyotas to Aston Martins were being auctioned. “We are seeing cars on the floor that have barely been used,” he added.

Winterstein expects the value of cars sold to decline; dealers are paying less than the trade price, and the oversupply is set to grow.

Rael Levitt, chief executive of auctioneers Alliance Group, said the company had received data from financial institutions of an estimated 55000 families showing “mortgage stress”.

The financial pinch was especially acute in the R1.5-million to R3-million market, he said.

Monthly payments on a R500000 bond over 20 years have increased from R4992 in June 2006 to R6399; a R1-million home loan now costs an extra R2815 a month; a R1.5-million home loan means an additional R4223 and on a R2-million bond the extra monthly amount is R5631. — Additional reporting by Nicki Gules and Xolile Bhengu

Article source - The Times

ABSA customers are now able to fix their Monthly Home Loan Repayment for up to 10 years.

The impact of rising interest rates is starting to have a marked effect on disposable income and confidence levels amongst home buyers this feature goes a long way in addressing this issues. Customers now have the ability to plan ahead for the next ten years.

Customers have the added option of only fixing a portion of the loan by making use of Absa’s Multiplan account offering. A customer may choose which portion of the loan should be calculated at a fixed rate and which portion should be calculated at a variable rate. The customer would therefore experience a reduced impact on the monthly instalment if the variable rate was to increase, as a portion would remain fixed. (Please note that MultiPlan can only be set up via a new loan, further advance or re-advance application process)

With Prime at its current levels of 15.00%, ABSA home loans‘ best rate equates to Prime less 1.60%, fixed for 10 years

You want to invest in property and also be able to say that you own your own house. But lately this is looking very difficult (almost impossible), specially for the younger generation. So how can we get into the property market with interest rates as high as it is now?

The best way to go at the moment is to take a look at the houses that has been in the market for a few weeks. Usually after about 5 weeks, these home owners starts dropping their price, just to get it sold. It is human to get impatient and make irrational decisions, so keep an eye out for these specials!

The other thing you can do is to buy a property with a joint income. Say you have a friend or someone in the family that also wants to invest in property. Give them the offer of buying with you, so you can qualify for a bigger bond amount. The important thing here is to really make sure you know this person very well and that he/she will be able to make their monthly installments.

The last thing you will have to make sure is that you have a good credit record. If you don’t then you will get rejected by the banks because of the NCA requirements that you will have to fulfill.

One thing to remember is that the housing prices are expected to go up by 60% - 70% by 20012. So if you don’t get into the market now, it will only be much ore difficult for you to do then.

Now, you want to get a home loan but you don’t know which documents to send to your lender or bond originator. This is also important as you want to get the process started as soon as possible and to do that, you will have to send the correct documents. Here is what your lender (bond originator) will need from you:

• A copy of your ID

• A copy of your latest salary slip

• A copy of an offer to purchase

• Your physical address

• Your work employer details - name, tel nr, address, date started

• 3 Months bank statements

This is the basic documents that you will have to send to your bond originator or lender to make sure that you get a mortgage approved quickly.