The latest mortgage lending data shows that the value of new mortgage loans granted for the 2022 fourth quarter declined year-on-year as expected due to the current interest rate hiking environment, according to FNB Commercial Property Finance Property Sector strategist John Loos.
The SARB New Mortgage Lending data showed a return to negative growth, following the prior quarter’s slight positive growth rate.
The value of new mortgages granted returned to -12.65% in the fourth quarter, from the previous quarter’s slightly positive growth of +0.65% year on year.
Writing in the bank’s Property Insights, Loos said the year-on-year decline was not surprising, given the economy went into quarter-on-quarter contraction in the final quarter, while above-target inflation led to a continuation of SARB’s interest rate hiking in the three months.
Online property news site Property Flash cited Betterbond CEO Carl Coetzee, yesterday saying the latest 50-basis point repo rate hike was likely to be the last increase for a while, as the SARB was widely expected to adopt a more accommodative stance in the coming months, to kickstart the economy.
Loos said the large new residential mortgage sub-component in the data was normally the key influence on the direction of the value of total new mortgage loans granted, due to its sheer relative size.
The growth in value of new residential mortgage loans granted declined by 14.46% year-on-year in the final quarter, after a slightly positive +0.47% growth rate in the prior quarter.
The value of new commercial mortgage loans granted also declined, by a lesser -5.67% year-on-year in the fourth quarter, after also recording a slightly positive +1.4% in the prior quarter.
The FNB Property Broker Survey has pointed to some loss in property sales activity growth momentum through 2022. And FNB’s Estate Agent Survey has already shown residential sales activity down from its post-hard lockdown highs, as well as being down on levels recorded at the end of 2021, by the end of 2022.
“Therefore, to see some late-2022 year-on-year decline in new mortgage landing, especially in the residential property class, is hardly surprising,” said Loos.
New mortgage loans by application, on existing buildings, vacant land, and for new construction, declined significantly.
The data showed the large ‘‘Existing Buildings’’ category having declined by -12.31% year-on-year. The ‘‘Construction’’ category declined year-on- year by the most significant magnitude of -17.32%.
“Given the onset of declining building plans passed, late in 2022 notably in the residential building sector, further decline in this category in 2023 seems likely,” he said.
New mortgage loans granted for vacant land fell significantly by -11.52% year-on-year, also pointing to a lack of investment and new building plans to come in the near term.
New mortgage loans paid out saw a slowing in growth in recent quarters to record a negative -10.98% year-on-year decline in the fourth quarter 2022.
“The slowdown in new mortgage lending growth to negative rates was very much expected. It was caused by a far higher base being created by especially the residential demand surge in the latter half of 2021. Then, the SARB began to hike interest rates in November 2021, and another hike by November 2022,” said Loos.
These interest rate hikes, along with economic growth having slowed in a weak global environment, are believed to be key to the slowdown in new mortgage lending.
“These events should be expected to cause further near-term decline in new mortgage lending, given a certain lag time for interest rate hikes to take full effect on borrowing demand. In addition, the SARB has continued to hike interest rates into 2023, lifting its repo rate by a further 50 basis points late in January, a further new mortgage demand dampener,” said Loos.
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