Lenders urged to be circumspect

THE National Credit Regulator (NCR) has warned SA’s credit providers to conduct reliable affordability tests before extending credit to customers.

This was in line with the principle of the National Credit Act, which came into effect in 2008, acting CEO Nomsa Motshegare said yesterday.

Ms Motshegare said she was becoming "slightly concerned" that too many people were granting unsecured credit.

"Fundamentally, we have seen a change in the way credit providers have been granting credit. They are not seeing much value in securing credit against mortgages while house prices and interest rates are low," she said.

"I know the new credit act was supposed to give people more ways of getting financing, but credit providers need to be careful and check their clients’ ability to pay," she said.

Ms Motshegare was commenting on the regulator’s Consumer Credit Market Report , which is due to be released today .

The report was based on data submitted to it by registered credit providers. It covered credit market information from June last year to June this year.

NCR statistics indicated a 25,95% increase in consumer credit granted compared with June last year.

"The NCR drew its attention to the continued increase in unsecured lending, which has seen a year-on- year growth of 61,27%," the regulator said yesterday.

"The regulator also noted that the proportion of new mortgages granted has rapidly declined from 51,91% in December 2007 to 29,91% in June 2011," it said.

The total value of new credit granted increased from R80,75bn for the quarter ended March this year to R85,08bn for the quarter ended June, an increase of 5,36% compared with the previous quarter, but 25,95% higher than a year ago.

The number of applications received for credit increased by 834700 from 5,8-million in March to 6,63-million in June, an increase of 14,39%. This also represents an increase of 1,43% compared with the same period last year.

As at June this year, the total outstanding consumer or gross debtors book was R1,23-trillion. This indicated quarter-on-quarter growth of 1,32%.

In terms of the breakdown, mortgages accounted for R773,37bn or 63,04% of the balance, secured credit was R228,97bn or 18,66%, credit facilities were R135,75bn or 11,07%, unsecured credit was R87,98bn or 7,17% and short-term credit was R747,10m or0,06%.

Ms Motshegare said that unsecured credit was not at "an especially dangerous level" in the debtors book.







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