Mortgage loans not affected by New Credit Act
Mortgage lending showed no let-up in the latest credit growth statistics, and rose by R17.3bn last during July. The new National Credit Act, which was introduced in June, requires banks to add more stringent criteria when giving loans. But not even this could slow down approved mortgaged loans.
Mortgage loans grew by R9.5bn a month in 2005, to R13.1bn last year, according to Kevin Lings, economist at Stanlib. The average monthly increase has been R12.97bn for the first seven months of this year.
The overall private sector growth slowed from 25% in June to 23.1% in July. Lings said that annual credit growth remained exceedingly high and that underlying credit demand had been more than 25% for the past few years.
The Reserve Bank increased interest rates four times last year, after expressing its concern about strong consumer borrowing. It resumed its monetary policy tightening in June this year, after consumer inflation breached the target band of 3% to 6%. Most economists say inflation as a result of credit growth is the one element that monetary policy can contain by increasing interest rates, while price pressures from food and fuel are beyond the control of the central bank.
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