Homeowners facing affordability problems are urged to contact their banks before sinking into serious arrears.
The declining economy is taking its toll on homeowners, with many forced to make tough decisions to avoid financial distress and repossession. Some are turning to their banks for assistance, while others are choosing to sell their homes before they fall into serious arrears.
Although unable to give exact figures for those who have had to give up their homes as a result of affordability challenges, the past few months have seen a definite increase in the number of distressed customers unable to meet monthly home loan repayments, says Buyisile Maseko, growth head at FNB Home Finance.
“This can be attributed to the tough economy environment and retrenchments,” she says. A number of Absa customers are approaching the bank for assistance before defaulting on loan payments, says Geoff Lee, managing executive for home loans, retail, and business banking.
“We also have proactive measures to identify and assist customers who show signs of financial distress, irrespective of whether or not the customer has missed a payment. We offer a variety of assistance plans with our aim being that the customer overcomes the challenge and retains a home.”
Keeping customers in their homes is a priority for FNB, too, Maseko says. Homeowners are urged to contact their banks or home loan providers “the moment you realise you’re unable to make the payment on your bond”. “Don’t wait until the banks’ collections and recoveries team or department contacts you.”
While the National Credit Act and banks’ prudent lending policies – which required greater deposits and focused on affordability based on disposable income – has helped limit the number of distressed sellers, says Herschel Jawitz, chief executive of Jawitz Properties, there are cases where affordability struggles are the reason for selling.
“We are seeing more sellers downsizing earlier than they had anticipated because of the increasingly high costs of maintaining a large home.” Selling due to financial distress is not really seen in the Winelands property market, but Chris Cilliers, chief executive and co-principal of Lew Geffen Sotheby’s International Realty in the region, is seeing a trend towards financial savviness in light of the economic downturn.
“People in all price classes are much more price and budget-conscious. Some are also downsizing in order to cut unnecessary costs, even though they may not be under financial stress.”
Homeowners’ cash flows are being assisted by the decreasing of the bond rate and new buyers are picking up properties for attractive prices, but unemployment and living costs are rising. This, Cilliers says, “will almost certainly” result in more sellers being under financial stress in the future.
Jill Lloyd, an area specialist in Claremont and Clare Park for Lew Geffen Sotheby’s International Realty, says the increase in rates and the costs of water and electricity have been big factors in people selling larger homes.
“I am one of those and, apart from noticing the decrease in (costs), I found I was hardly using any cleaning materials. Those cost a fortune these days and (in my previous home) I was polishing floors I wasn’t walking on.” She is assisting some elderly homeowners with their moves to smaller, more affordable properties.
“I have a house that was in an estate that was being rented out for income for the two heirs, but now the one is short of money so they must sell it.”