‘Home loan rejections of historically disadvantaged is concerning’

Human Settlements Minister Mamoloko Kubayi says the rejection rate of historically disadvantaged persons applying for home loans is concerning.

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

Two million of those were from the previously advantaged persons with just over 1 million approvals.

During the same period, four million applications were from previously disadvantaged persons with just over 2.4 million approvals.

High interest rates, levels of indebtedness and a limited supply of affordable housing have been cited as reasons for rejections.

Kubayi briefed the media in Pretoria on the department’s provision of adequate housing.

Access to mortgage financing for the gap market or missing middle is becoming increasingly difficult.

In a five-year period, banks rejected 68% or 3 million of applications.

Kubayi believes the figures could be more due to duplication of applications worsened by poor compliance from financial institutions.

According to information provided by banks to the Office of Disclosure, the average mortgage loan approved per historically disadvantaged persons was R527 000 compared to previously advantaged persons at an average mortgage value of R2.5 million.

Kubayi says this continues to perpetuate inequality.

“The number of HDPs which is your historically disadvantage individual, application is twice as high as that compared to white, for example a black person walking into a bank versus their white counterpart or similar. We have twice higher with black people or previously disadvantaged, coloured and Indian communities.”

“However, the approval rate of the previously disadvantaged individual will be sitting at 53% while despite the fact that we are many who of those are previously disadvantaged, the approval rate is lower,” adds Kubayi.

To address the disparity, Kubayi is calling for legislative amendments to strengthen the Home Loan and Mortgage Disclosure Act to investigate home loan consumer complaints.

“Sometimes they are myths, sometimes it’s people’s realities where people say to us, I walked with a partner or person, same background, but I have been racially profiled. Even if their myths and allegations, once we compel everybody to disclose, we do believe that the process must be transparent,” she adds.

The department is also proposing for auditors to audit the returns to improve the quality of information on the returns submitted by banks and increase the penalty amount from R100 000 to a much higher amount for non-compliance.

The Office of the Disclosure’s Dr Tshifhiwa Mpingalale says the current trends are impeding economic transformation.

“It’s around the gender-based approval loans and also white vs black approval in terms of even interest rates that are offered, either [to] historically disadvantaged individuals. We have identified these as issues impeding the economic transformation given the significance … in our economy,” adds Mpingalale.

Meanwhile, the department says it’s embarking on a forensic investigation into alleged syndicates’ involvement in the sales of RDP houses as well as repurposing over 140 buildings in the Johannesburg CBD into social housing in a bid to address the affordable housing shortage crisis in urban areas.

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