29 October 2009

29 October 2009

Compiled by: Jacques du Toit Senior Property Analyst Absa Home Loans Absa Group Limited (Reg No 1986/003934/06) 45 Mooi Street Johannesburg 2001

Mortgage advances growth still slowing down Mortgage advances growth by monetary institutions tapered off to 4,8% year-on-year (y/y) in September 2009 (5,6% y/y in August), which was the lowest growth rate since February 2000. On a month-on-month basis, the outstanding balance on mortgage loans was up by 0,16% in September, after rising by 0,24% in August.

PO Box 7735 Johannesburg 2000 South Africa

In respect of the household sector, mortgage advances growth of 3,9% y/y was recorded in September, down from 4,3% y/y in the preceding month. Month-onmonth growth of 0,1% was registered in September compared with 0,26% in August. The amount of outstanding household mortgage balances in September (R711,5 billion) had a share of almost 70% in total credit extension to the private sector.

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Year-on-year growth in total credit extended to the household sector slowed down to 3,1% in September this year, from 3,6% y/y in August. On a monthly basis, the growth rate was only 0,1% in September (0,3% month-on-month in August).

The information in this publication is derived from sources which are regarded as accurate and reliable, is of a general nature only, does not constitute advice and may not be applicable to all circumstances. Detailed advice should be obtained in individual cases. No responsibility for any error, omission or loss sustained by any person acting or refraining from acting as a result of this publication is accepted by Absa Group Limited and/or the authors of the material.

The abovementioned trends with regard to the growth in mortgage advances and household credit is a reflection of the extent to which the economic cycle affected the household sector, the property market and the demand for mortgage finance. This despite the fact that interest rates were cut by a cumulative 500 basis points since December last year, which caused mortgage repayments to be down by a total of 26,3% on average. Conditions in the housing market appear to be changing for the better, with nominal and real growth in house prices recorded on a monthly basis lately. Year-on-year price deflation slowed down markedly, while transaction volumes are picking up. However, the household sector is still experiencing some financial strain with high levels of debt and income remaining under pressure. As a result, mortgage advances growth is set to remain relatively low in the near term, only to recover in 2010 on the back of a steadily growing economy and the lagged affect of lower interest rates.

Mortgage Advances, Inflation and Interest rates Month

Total mortgage Mortgage advances 1 advances to households R billion y/y % ch R billion y/y % ch % of total Sep 08 941.7 16.6 685.0 20.6 72.7 Oct 08 954.8 16.1 692.2 19.9 72.5 Nov 08 963.2 14.9 696.5 19.9 72.3 Dec 08 966.9 13.2 698.3 18.6 72.2 Jan 09 967.6 11.9 700.7 9.9 72.4 11.9 703.8 8.4 72.2 Feb 09 974.9 Mar 09 981.1 11.2 708.1 7.9 72.2 Apr 09 982.1 10.6 708.4 7.7 72.1 May 09 982.3 9.4 708.3 6.8 72.1 Jun 09 983.4 8.2 708.4 6.0 72.0 Jul 09 982.8 6.4 709.0 4.7 72.1 Aug 09 985.2 5.6 710.8 4.3 72.1 Sep 09 986.8 4.8 711.5 3.9 72.1 1 Comprising commercial and residential mortgages (end of period) Sources: SARB, Stats SA

1

CPI inflation % 11.8 11.0 10.7 9.5 8.1 8.6 8.5 8.4 8.0 6.9 6.7 6.4 6.1

Mortgage rate % 15.5 15.5 15.5 15.2 15.0 14.2 13.8 13.0 12.0 11.0 11.0 10.7 10.5

Mortgage Advances Growth and Interest Rates 35

18

30

17 16

y/y %

25

15

20

14 % 15

13

10

12

5

11

0

10 02

03

04

05

06

07

Total mortgage advances (left)

08

09

Mortgage rate (right)

Source: SARB

Household Mortgage Advances Year-on-year % change 10 9 8 7

%

6 5 4

Source: SARB

2

Sep-09

Aug-09

Jul-09

Jun-09

May-09

Apr-09

Mar-09

Feb-09

Jan-09

3