Tracking Mortgage Loan Performance by Market Segment in South Africa: 2004-2014

CAHF, with the support of the NHFC and the FinMark Trust, launched the most recent installment of its research on mortgage loan performance in South Africa at a presentation on Wednesday, 22 April 2015. CAHF has been pursuing an analysis of NPLs in South Africa’s mortgage book, segmenting between FSC/Affordable loans and the conventional market, for some time. Illana Melzer of Eighty20 presented the most recent findings, which look at loans granted between 2004-2008 and between 2009-2014, and their performance up until November 2014. The presentation explored how performance has changed over the past five years using credit bureau data on monthly payments for all mortgages. The presentation identified key factors that appear to drive performance while presenting a set of questions and implications for participants in the sector.

About the speaker: Illana Melzer is a founder and partner of Eighty20. She has worked extensively with both CAHF and the FinMark Trust on access to housing finance.

More information about the presentation:

According to data published by the National Credit Regulator (NCR), South African credit providers originated over R124 billion in mortgage loans in 2013 (data for the full year for 2014 has not yet been published). Roughly 30% of mortgages granted (by number) were for less than R350 000 with 11% of all mortgages (again, by number) going to individuals earning less than R15 000 per month. According to the NCR, as at end Q3 2014 roughly 3.3% of mortgage loans by number and 3.9% by value were 90 days or more in arrears. The trend is positive, with arrears levels significantly lower than their peak of 6.5% by number and 9.4% by value in 2010. The data published by the SARB for bank lenders tells the same story. However, neither the SARB nor the NCR publish performance data by market segment; their data cannot be used to explore how mortgages granted to lower income households performed relative to those granted to higher income borrowers.

This is an important question for policy makers and housing finance practitioners wishing to expand access to housing finance for low income earners. What are the risks involved, and how might they be managed? For the past 3 years, FinMark Trust has been tracking mortgage loan performance together with Eighty20, and the work has revealed interesting results. The Centre for Affordable Housing Finance, with the support of the FinMark Trust and the National Housing Finance Corporation, has now taken the analysis further, tracking the performance of mortgages in the affordable market as compared with the traditional market.