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Pillars of Justice

Homeowners in South Africa Are Facing Financial Challenges: What You Need to Know


South African homeowners are finding it increasingly difficult to keep up with their home loan repayments, leading to a rise in foreclosures. At Gerhard Barnard Inc Attorneys & Conveyancers, we understand the urgency of this issue and want to help you navigate these challenging times.

Financial Distress Among Homeowners

Recent data from Sentinel Homes reveals that the number of up-to-date mortgage accounts has fallen from a historic average of 92% to 88% in the last quarter of 2023. This decline highlights the financial strain many South Africans are currently experiencing. Additionally, the number of loan accounts in arrears has surged by 50% over the 18 months leading up to December 2023.

Experian's Consumer Default Index (CDI) for the first quarter of 2024 also shows a worrying trend, with the index dropping primarily due to home loans. The CDI fell from 4.56 in Q1 2023 to 4.69 in Q1 2024, driven by a 21% deterioration in home loan defaults, which rose from 2.22 to 2.68 year-on-year.

Economic Factors at Play

Renier Kriek, managing director of Sentinel Homes, attributes these financial difficulties to global and local economic factors. Persistent inflation and high interest rates, influenced by supply-chain disruptions during the Covid-19 pandemic, the Russia-Ukraine war, and recent conflicts in the Middle East, have all played a role. In South Africa, the repurchase rate (repo rate) of the South African Reserve Bank has reached its highest level in 15 years. Interest rates are not expected to decrease until next year, as inflation remains stubbornly high.

Taking Control of Your Home Loan Situation

Finding yourself unable to afford your home loan instalments is a daunting position. However, it is crucial to take proactive steps to avoid the financial disaster of foreclosure. Kriek advises homeowners to engage with their home loan credit provider before missing a payment. If an arrangement cannot be made in advance, it is essential to pay something toward the debt immediately and consistently, as this can serve as a foundation for negotiations with your home financier. Accounts receiving regular payments are less likely to face foreclosure than those receiving none.

If financial distress seems unlikely to resolve soon, selling the property may be a viable option. Distressed homeowners who market their property before the bank's foreclosure attorney steps in will likely secure a better return on the sale and avoid additional costs associated with the foreclosure process.

Seeking Support

Pride can often prevent individuals from discussing financial difficulties with family and friends. However, reaching out to loved ones can provide a lifeline, offering support and assistance that a remote credit provider cannot.

Banks Are Willing to Help

Credit providers may offer distressed homeowners a range of assistance options, such as payment holidays or interest-only periods. Existing arrears can be spread over several months or through an extended loan term. While debt review can save your home, it also prevents the homeowner from taking on new debt until the review is complete, which can take several years.

Credit providers generally prefer rehabilitating existing customers rather than foreclosing and originating new loans due to the high fixed costs involved.

We're Here to Help

At Gerhard Barnard Inc Attorneys & Conveyancers, we are committed to supporting homeowners through these challenging times. If you are facing financial difficulties with your home loan, do not hesitate to reach out to us for expert advice and assistance. Together, we can find a solution that works for you and helps you steer clear of foreclosure.

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