SA banks easing up on their bond loan criteria

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He says some banks are expressing an interest in re-entering the bond finance market and have slightly relaxed on some of the more stringent clauses in their bond loan criteria.

"Previously," says van Alphen, "the generally accepted norm was for the banks to give approved creditworthy customers (i.e. those without any blemish on their credit record) a 90% loan at prime, 9,25% plus 0,75%. Now we are seeing 90% bonds awarded at prime minus 0,45% - again provided the client is deemed creditworthy. This is a significant change, especially as in many cases it has been applied not just to the banks' clients but to a wider range of the public who have not previously dealt with them."

The records, says van Alphen, show that the banks acting in this way in a very short time period are increasing their market share, not only with Rawson Finance but overall.

"One has to welcome the growth of a more competitive spirit among the banks, but at the same time it is reassuring to realise that this time there is no likelihood at all of irresponsible or reckless spending. The National Credit Act has put an end to that once and for all."

Throughout the market, says van Alphen, there has been a reduction in unsecured loans (down by some 5%) and this is accompanied by a stronger desire by the less affluent sections of the population to become bona fide home owners, the virtues of this being increasingly appreciated.

The biggest demand, says van Aphen, is in the R800 to R1,5 million price bracket, but both above and below these price levels there is now an increasingly strong call for bond finance and it is particularly pleasing to find that interest in upmarket homes is reviving.

"If the banks involved in the new policies do not get cold feet," says van Alphen, "and continue to operate on these lines, it should be possible for Rawson Finance this year to up its turnover by 8 to 10% and to improve its current 65% success rate on bond applications to around 70% plus."

Van Alphen adds that there is still a perception among the less well-informed home buyers that calling on the services of a bond originator will add to their overall costs. In reality, he says, the exact opposite is true: the banks pay the originators' fees and bond originators, by contacting a wide range of possible financiers, tend to get the most competitive quotes for their clients. It is worth noting that today 60% of awarded bonds have been routed through bond originators.