Standard Bank and First National Bank’s (FNB) affordable housing loan books are experiencing a boost thanks to the market boom of first-time home buyers.
Standard Bank’s books grew by R14 billion last year while FNB has a loan book of close to R11,5 billion.
The two banks are doing their part to further boost this growing market with Standard Bank setting aside R2 billion for affordable housing. Meanwhile FNB says it is offering market related rates priced individually so that each potential home-owner gets the best rates based on their individual circumstances.
FNB’s business unit Housing Finance, focuses solely on the affordable housing market. According to Marius Marais, CEO of FNB Housing Finance, anyone who earns below R25 000 who’s looking to purchase a home under R600 000, falls in this market.
“In this market the majority of home buyers are in fact first-time home buyers. Housing Finance started 10 years ago and has to date financed 97 000 homes. We also offer owner education to first time buyers,” says Marais.
According to Marais, because property ownership is such a big part of wealth creation, it is also the biggest asset in the market. It is because of this wealth creation that many potential home-owners are opting to buy rather than rent houses. This capital creation may be used in future to create further wealth.
“We estimate that the first 1 000 home owners in Cosmo City -a growing suburb in Gauteng- accumulated R100 million of private capital with the growth in their property prices,” said Marais.
Demand for affordable housing
But Marais adds that there is still an estimated 900 000 homes needed to accommodate first time home owners that want to purchase properties below the R600 000.
However, banks are not the only ones doing their bit to help people onto the property ladder. According to reports, government has put initiatives in place as well. These measures include the finance-linked individual subsidy programme. This project aims to reduce the initial home loan amount to make monthly instalments more affordable. For more information about this click here
What to consider when applying for a home loan
All potential homeowners should consider the full cost of home ownership before taking out a loan. Marais says you should look at your individual budget and reduce items such as short term debt and other non-essentials first. Also it’s a good idea for first time home buyers to attend a home-ownership educational programme, which is offered at FNB.
If you are worried about interest rates going up there’s always the option of fixing your home loan rate. “Potential home owners should consider a fixed interest home loan particularly for the initial years because it creates a stable monthly repayment. Also look at the loan term offered by the bank. Longer loan terms usually mean a lot more interest even though the actual quoted rate may be lower,” says Marais.