Household Credit Debt
South African households owe almost R1.5 trillion in credit debt as of the end of last month, according to property analyst Jacques du Toit of Absa Home Loans.
Du Toit issued a note on Monday, 29 February revealing that the amount of credit debt owed by South African households rose by 4.6% year-on-year (y/y) to R1.485 trillion at the end of January this year.
Household Credit Growth
The value of household secured credit balances grew to R1.1 trillion, representing 75.3% of total household credit balances. As such, growth remained almost unchanged at 3.9% at the end of last month, in comparison to the final three months of 2015.
Household unsecured credit balances, comprising 24.7% of total household credit balances, grew by 6.6% y/y to R366.4 billion at end-January, as opposed to 6.7% y/y at end December 2015.
Secured and unsecured credit balances grew for the most part stably during the first month of 2016 from the end of 2015. Secured and unsecured household credit balances are expected to stay in the single digits during 2016, according property analyst Jacques du Toit of Absa Home Loans.
This projection is based on influences like anticipated low employment and economic growth, accelerating inflation and rising interest rates over the course of the year.
Mortgages and Instalment Sales
The value of total outstanding household and corporate mortgages grew by 6% y/y to R1 232 billion.
Instalment sales and mortgage balance growth remained fairly stable last month from December 2015. Growth in instalment sales balances comprised 22.2% of secured balances, chiefly in connection with vehicle finance, growing by 2.4% y/y at end January.
“The continued low growth in instalment sales balances is in line with declining new vehicle sales volumes up to January” Du Toit said.
Outstanding household mortgage balances grew by 4.5% y/y to R867.8 billion at the end of January 2016. Representing 28% of total private sector credit balances and 70.4% of total mortgage balances at end January.
Corporate mortgage balances rose by 9.6% y/y to R364.2 billion at the end of last month.
“The further slight uptick in household mortgage balances growth was to some extent related to the base effect of low year-on-year growth twelve months ago and increased financial pressure on homeowners who were paying extra funds into their mortgage accounts in the past,” said Du Toit.
Private Sector Credit Extension
The growth of private sector credit extension (PSCE) in South Africa fell from 10.18% y/y in December – an almost seven-year high – to 8.54% y/y in January. Whereas the consensus forecast was 9.55% y/y, according to the SA Reserve Bank’s money supply and credit data.
Accordingly, growth in broad M3 money supply decelerated to 10.28% y/y in January from 10.47% y/y– its highest rate since the start of 2009.
NKC African Economics analyst, Bart Stemmet said PSCE growth has dropped below the average of the last two years. However, the series has remained fairly unstable during the last couple of months. Consequently, this may only indicate a temporary blip Stemmet said.
“On the other hand, there has been a broad upward trend in money supply growth over the past few years despite the SA Reserve Bank’s monetary tightening efforts during this period,” he said.
“Policymakers will keep a close eye on this phenomenon over the months to come.”