FSC Mortgage Loan Performance Study

Also take a look at the FSC Mortgage Loan Performance Workbook.

This is the third report on the performance of mortgages granted to lower income households in South Africa since 2004. The first report focused exclusively on loans originated under the Financial Sector Charter (FSC) process[1]. That initial analysis published in August 2011 explored FSC loan performance measured in terms of the proportion of loans that were 90 days or more in arrears based on data submitted by the big four banks to credit bureaus. It tracked this against published data on the aggregate performance of the entire mortgage market provided by the South African Reserve Bank and the National Credit Regulator. The report highlighted that the comparison was limited; ideally the same data source and methodology should be used to compare performance.

The second iteration of the analysis, published in August 2012, explored repayments data submitted to credit bureau data for mortgages issued by the big four banks across the market as a whole. The comparison was thus more robust as bureau data was used to track loan performance across both portfolios and the methodology used to derive performance metrics was aligned across segments of the market. Also introduced in that second report was an analysis of a second portfolio of interest, namely mortgages issued in the so-called ‘Affordable’ Market originated between January 2009 and December 2011[2].

This latest report updates this previous analysis for both FSC market loans originated between 2004 and 2008 and Affordable market loans issued between 2009 and 2011.

The findings presented below focus on the probability of default. While this is a critical indicator of risk, it tells only a part of the risk story; lenders are concerned about both the probability of default and the loss given default. No analysis has been undertaken at this stage with regard to the latter, although further iterations of this analysis will seek to identify indicators in that regard.

[1] These loans were originated between January 2004 and December 2008 to households with a monthly income of between R1500 and R7500 measured in 2004 Rands

[2] The Affordable Market loans were originated between January 2009 and December 2011 to households with a monthly income of less than R15,142 in 2009 Rands