Unsecured lending cools down, mortgage loans rise

The latest credit extension figures released by the National Credit Regulator (NCR) shows a steady increase in mortgage and vehicle finance while unsecured lending is shrinking.

 While marginal, the trend will be welcomed by observers who have expressed concern about the rise of consumer credit at the expense of asset backed finance. It may also be good news for South Africa’s directionless residential property market.

The NCR’s Consumer Credit Market Report (CCMR) shows that the total value of new credit granted increased by R7.60 billion (6.93%) to R117.21 billion during the quarter ended September 2013. This compares to R109.62 billion during the quarter ended June 2013.

 The CCMR is based on data submitted to the NCR by registered credit providers.  NCR CEO Nomsa Motshegare said the statistics reported for the quarter ended September 2013 indicate a moderate increase in the value of new credit granted. She also encouraged consumers to live within their means and to use credit responsibly.

 The CCMR shows there was an overall quarter-on-quarter growth for all credit types with the exception of “Unsecured” credit and Short-Term credit. Mortgages and “Secured credit” had the largest quarter-on-quarter growth of R4.42 billion and R2.37 billion respectively.

The number of applications received for credit decreased by 127,000 from 10.35 million in June 2013 to 10.22 million in September 2013, a decrease of 1.23% quarter-on-quarter and a decrease of 1.52% year-on-year.

Highlight in credit granting trend during the quarter including the following points:

  • The value of new mortgages granted increased by 14.69% quarter-on-quarter from R30.10 billion to R34.52 billion.
  • Secured credit, which is dominated by vehicle finance, increased from R37.54 billion for June 2013 to R39.91 billion for September 2013, a quarter-on-quarter increase of 6.32%.
  • Credit facilities, consisting mainly of credit cards, store cards and bank overdrafts, had an increase of 6.57% quarter-on-quarter from R16.63 billion to R17.72 billion.
  • Unsecured credit decreased from R22.06 billion for June 2013 to R20.90 billion for September 2013, a quarter-on-quarter decrease of 5.29%.
  • Short-term credit decreased from R1.45 billion for the quarter ended June 2013 to R1.39 billion for the quarter ended September 2013, a decrease of 3.84%.
  • Developmental credit had a quarter-on-quarter increase of 50.90% from R 1.83 billion to R 2.77 billion.

These figures may impress people who have been concerned that the explosion of unsecured lending over the past few years pose a threat to the South African economy. Some observers have even spoke of a possible financial bubble if the situation is not captured.

Among the concerned parties is government which expressed this through a cabinet statement early this month. The National Treasury and the Department of Trade and Industry followed up with a statement announcing measures to assist over indebted  consumers and to curb reckless lending. The departments said “While Government recognises that access to credit is critical for household consumption expenditure and economic growth, Government is concerned about the very high levels of household debt and over-indebtedness. Thus, in addition to broader financial sector regulatory reforms, an immediate set of comprehensive steps is necessary to deal with the problem of present and future household over-indebtedness.”


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