Half of home loan applications declined by banks as whites remain favoured: Kubayi

Human settlements minister Mmamoloko Kubayi has revealed how bank-approved home loans are still skewed in favour of white people.

About half of home loan applications are declined by banks, an indication that the number of people who can’t access housing is still high, she said.

The government says the Office of Disclosure’s analysis for the past five years shows a concerning trend in the affordability of housing for the gap market.

Kubayi said the gap market was experiencing serious difficulties in terms of accessing housing and this not only affected the middle class but also the working class.

Addressing journalists on Monday, Kubayi said the factors that drive unaffordability of housing include high interest rates resulting in the high cost of living, limited access to finance, higher property prices, high level of indebtedness and limited supply of affordable housing.

The Home Loan and Mortgage Disclosure Act (HLAMDA) compels financial institutions to disclose information about their lending activities and practices in the home loan market.

The banks have to disclose to the department of human settlements through the Office of Disclosure, who they have given bonds to, the categories and the amounts provided.

The information submitted to the Office of Disclosure is mortgages, pension-backed lending and unsecured lending for home loan/use purposes only.

In the past it had only been possible to ascertain the number of home loans granted by financial institutions, but not those home loan applications which have been declined and their reasons, said Kubayi.

Between 2018-2022, just less than 6-million mortgage and home loan applications were received and processed by the banks.

Of the 6-million applications received, 2-million were from previously advantaged people (white people) with just over 1-million approvals.

Applications from historically disadvantaged people (Africans, coloureds and Indians) during this period were 4-million with just over 2.4-million approvals. 

The rejection rate for home loan applications has remained high, averaging about 68% in recent quarters, further highlighting the challenges faced by the gap market in accessing finance, she said.

The data was about people who went to the banks and applied. It excluded those who checked their affordability using online apps for instance, or those who would go to a branch, and at a mere glimpse of their payslip, they get told they can’t get a home loan without an application getting processed, said the minister.

“However, we remain concerned that just under 3-million of those applications were declined.”

She said the department believed there were more people who are trying to have access to a house but are not able to get it with financial institutions citing several reasons including bad credit records and lack of affordability.

“The decline in approvals in the gap market is quite significant.

“Between 2023 and 2024, there is a sharp decline in terms of people who are being approved in the market in terms of being able to have a shelter above their heads which is secured, and which is decent. This indicates that access to mortgage finance for the gap market is becoming increasingly difficult.”

In terms of historically disadvantaged people, the total number of applications over five years was about 4-million valued at R2-trillion.

The number has been on the increase over the years but slowed down in 2020 due to Covid-19.

The total number of approved applications over five years is 49% of the total valued at R1-trillion compared to declined which is valued at R636bn.

About half of the applications are declined which is an indication the number of people who can’t access housing is still high.

The number of applications by historically disadvantaged people is twice as high as that of their white counterparts. However, there was an approval rate of 53% for whites compared to 49% approvals for historically disadvantaged people which means the approval trend is still skewed in favour of white people.

The average mortgage loan approved per historically disadvantaged people was R527,000 compared to white people at an average mortgage value of R2.5m which still indicates wealth inequality.

Kubayi said this was worrying as it perpetuated inequality.

The minister also revealed that 1.3-million approved loan applications were from women compared to 1.1-million received from men.

While the office of disclosure is an important institution which is a critical element in achieving spatial transformation and integrated human settlements, Kubayi said the information it receives is riddled with data duplication and incomplete.

“We believe it’s an inaccurate picture. We believe the situation is even worse than what we are seeing because currently, the banks have to disclose voluntarily.”

She said the government was planning to review legislation to make disclosure compulsory especially when the banks have declined an application, adding that banks will have to disclose reasons for declining the application.

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