By Nicolette Dirk, finance writer, Justmoney.co.za
It’s best known for its personal loan offering and cheap transactional banking products but now retail bank Capitec is due to offer home loans to the South African public for the first time.
It announced the new home loan product last week after it concluded a co-operation agreement with SA Home Loans.
The pilot introduction of home loans will be launched in branches in Gauteng before it will be available to rest of the country.
Capitec CEO, Gerrie Fourie, said they recently embarked on a #AskWhy campaign and the feedback from their customers revealed they wanted the bank’s simplicity approach to home loans.
“In response to this, we entered into an agreement with SA Home Loans to deliver home loans to the market in the simple, efficient way that both our client service models are well-known for,” said Fourie.
When will the home loan be available?
These home loan offers will be piloted in 160 Capitec branches in Gauteng from the 7 July and will be rolled out to the rest of the country at a later stage.
In the meantime, Capitec’s in-branch consultants can assist with the application and initial approval process where after customers will be contacted by a SA Home Loans consultant to guide them through their full evaluation and registration process.
Fourie said Capitec Bank signed the cooperation agreement with SA Home Loans because the company had a good ‘cultural fit’ with Capitec.
“The fit between our companies creates a powerful platform to broaden consumers’ access to home finance,” added Kevin Penwarden, SA Home Loans CEO.
Who will have access to these home loans?
The product will be available to new bond applicants as well as Capitec clients who would like to switch their bond to SA Home Loans. Consumers can apply for home loans of between R100 000 and R5million. Applicants will need a minimum joint household income of R8 000 to qualify for this loan.
“The agreement will expand distribution for SA Home Loans through most of our over 630 branches,” Fourie said.
According to Michele Bovet, marketing manager at SA Homeloans, their target market does not include people of significantly high wealth.
"We generally target middle income clients, where the need for home loans is greatest. This is similar to Capitec’s target market, which is why the association between our companies is such a good fit," said Bovet.
She added that in order to service a bond of R5million, one would need to earn an income of R150k per month (since legislation requires a minimum of 33% payment-to-income (PTI) ratio).
"Demographically, this represents a very small percentage of the South African population, and it is also likely that clients in this income bracket have private banking facilities. Less than 2% of SA Home Loans clients have a bond in excess of R2.5m, and we have very few enquiries for home loans of R5million," said Bovet.