The return of the 100% bond

There's never been a better time to apply for a home loan, as banks are approving more 100% bond applications

This is according to data released by the Rawson Property Group’s property financing business division that shows a significant jump in the past year in the number of home loan applications being approved, spiking from 47% last year to 60% as of March this year.

“For the last year or so, there’s been a definite trend towards a more relaxed approach to property finance from the banks,” says Mark Hendricks, Rawson Finance Regional Manager.

“They’ve been offering more favourable rates, are open to 100% bonds again, and have been considering applications from a far wider pool of candidates than ever before.”

READ MORE: What to do when you can’t afford your bond repayments

Now more than ever before, banks are becoming more favourable towards entrepreneurs who have traditionally struggled to obtain a home loan, with Hendricks noting that banks have become more willing to “look outside the box” in their approach to bond approvals.

“Entrepreneurship and the gig economy is becoming pretty mainstream now, so it’s a logical step for banks to try to facilitate more of these kinds of clients. They aren’t forcing people to limit their applications to their current bank in the hopes that a shared history counts in their favour, either. In many cases, we get the best rates for our applicants from banks looking to expand their current client base,” he says.

Rawson’s data is corroborated by data recently released by bond originator BetterBond, whose CEO Rudi Botha has noted a 4% increase in bond approvals over the past year.

“This increase is partly due to the fact that many home buyers are financially better prepared than they were a year ago, but also a result of the increasing competition among lenders for new home loan business, as evidenced by the fact that more home loan applications are now being approved by the first bank to which they are submitted,” he says.

So what is causing this change in heart?

READ MORE: Paying an extra R200 into your bond can save you R100K

Hendricks says banks have relaxed their lending criteria after applying overly strict requirements following a crackdown with the National Credit Act.

“This created an environment in which lending criteria were, perhaps, excessively stringent, and made it very difficult to secure financing if you didn’t fit the ‘perfect’ financial mould,” he says.

The recent cut in the prime lending rate, coupled with banks’ increasing willingness to offer more competitive interest rates present the optimal opportunity for more consumers to become homeowners.

While the banks are becoming more lenient, this doesn’t mean that banks are lending recklessly and you will still need to adhere to all the checks and balances.

“Every application still undergoes rigorous screening before it can be approved. That makes it essential for applicants to put their best foot forward and ensure their applications not only present all the pertinent information, but are also comfortably within their affordability range,” he says.