MORTGAGE, VEHICLE LOANS APPETITE REMAIN HIGHEST

MBABANE – Despite the financial distress caused by COVID-19 and the recent unrest, the appetite for mortgage loans remains high.

This is as per a comparison done by this publication for a five-month period (May to September 2021). The rise also happens when there is a notable increase in auctions for houses that are attached by financial institutions due to default in payments.
The term mortgage refers to a loan used to purchase or maintain a home, land, or other types of real estate. The borrower agrees to pay the lender over time, typically in a series of regular payments that are divided into the principal and interest. Latest figures sourced from the Central Bank of Eswatini (CBE) showed that mortgage loans rose by 0.8 per cent to hit E3.7 billion at the end of September this year. October figures are yet to be released. This is one of the highest figures for the period under review.

Mortgage loans had receded by at least 1.1 per cent to reach E3.6 billion at the end of August. In the previous month (July) they had fallen by 0.02 per cent to reach E3.7 billion. At the end of June, housing finance had grown by a lower margin of 1.4 per cent month-on-month to hit E3.7 billion.  At the end of May, housing loans had risen by a lower margin of 0.5 per cent to reach E3.6 billion. Meanwhile, the recorded low interest rates are believed to be keeping the desire for loans high. The country’s repo and prime rates are at 3.75 and 7.25 per cent, respectively, since July last year. The 7.25 per cent is the same rate for mortgage. A change in the repo rate affects people who have home loans or who have borrowed money from the bank. This is because it is linked to the prime interest rate, which is the interest rate used by banks when loaning money to customers with a healthy credit score.

Economy

The cut in the repo rate was done to give the economy a boost amidst the effects of the coronavirus pandemic. The economy was found to be fragile in the wake of the global pandemic. It was felt this would result in less demand for exports and domestic goods and services. The drop in rates therefore gave consumers with debt linked to prime some extra money in their pocket. An interest rate cut means that you will pay a lower interest rate on the money you owe to the bank. If you were looking to make a big purchase such as a home, you would stand a better chance of receiving 100 per cent finance due to the repo rate cut. Motor vehicle loans, on the other hand, had been averaging at least E1 billion in the five-month period from May to September.  
The lowest figures of E892.5 million were recorded in June this year and they reflected a contraction of 3.1 per cent. Worth mentioning is that vehicles have been auctioned in big numbers this year, as financial institutions are trying to recover their loans.
During these times of COVID-19, an analyst felt it was better to invest in immovable property like land than vehicles, as the former appreciated over time.

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