LENDING on cars and furniture outstripped new mortgage lending for the first time in the first two quarters of this year as banks tightened mortgage lending and consumers held back from borrowing, a report from the National Credit Regulator, published today, shows.
Mortgage lending of R18,9bn was just exceeded by the R19bn lent as secure credit — secured mainly against vehicles and furniture — in the first quarter. New home loans fell further to R17,7bn in the second quarter as secured credit grew to R18,8bn, the regulator’s latest Consumer Credit Report shows.
In addition, the gross debtors’ book — comprising loans of all types extended by banks, retailers, vehicle financiers and smaller credit providers that make up 90% of the market — fell in the second quarter for the first time, albeit less than 1%, to R1,14-trillion from R1,15-trillion in the first quarter.
Mortgage lending remains the largest component of consumer credit. Even in the second quarter, home loans accounted for R732bn, or 64%, of the gross debtors’ book.
The figures are a dramatic illustration, however, of how quickly lenders tightened the screws in the wake of last year’s credit crisis. In the first two quarters, household debt remained high — above 76% as a proportion of disposable income.
“For the first two quarters, the interest rate cuts (that started the previous December) hadn’t worked through. Also, companies had started retrenching by then. Consumer confidence was negatively impacted,” said Life consumer economist Tendani Mantshimuli.
It will be cold comfort for many to hear relief is only likely next year.
Nomsa Motshegare, the regulator’s chief operating officer, yesterday said the effects of recent interest rate cuts would only start to be felt in the coming year. “The debtors’ book will start growing again because banks are relaxing their (lending) criteria,” she said.
The payment profiles of both mortgage and secured credit worsened in the first half of the year, with the share of credit in arrears by 120 days or more increasing. The three months to June marked the sixth successive quarter of a deterioration in these measures.
“One suspects that households are sacrificing or postponing payments on large-ticket items in order to account for more immediately required expenditure,” commentary accompanying the report said.
In contrast to lending for items such as dwellings, vehicles and furniture, credit-facility lending, such as on store and credit cards, grew, with the total rand value of approvals rising 2% to R6,4bn in the second quarter from the first. This was still 26% below the figure a year earlier. Store card approvals rose a whopping 34% to R2,2bn, as one clothing retailer increased its annual card limit , Motshegare said. By contrast, the value of approvals for credit and garage cards and bank overdrafts fell quarter on quarter.
Growth in unsecured credit — primarily personal loans — also rose in the second quarter from the first, up 5,6% to R7,2bn. The rise of lending on store cards and on personal loans came from people who were not trying to pay off bonds, Motshegare said, adding: “Most of them don’t have mortgages.”
blebym@bdfm.co.za