Consumers borrowing less, but owing more than R2 trillion

South African consumers are borrowing less, but owing more according to the latest figures for the first quarter of 2021 released by the National Credit Regulator (NCR). New credit granted decreased quarter-on-quarter from R154.42 billion to R138.81 billion, while the number of credit agreements decreased from 3.66 million to 3.20 million.

The total outstanding consumer credit balances at the end of March 2021 was R2.04 trillion, 1.27% more than the previous quarter and 2.68% compared to the same period in 2020, according to the NCR’s Consumer Credit Market Report and Credit Bureau Monitor based on data submitted by registered credit providers and credit bureaus.

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Credit granted

The most significant trends regarding credit granted from January to March this year were that:

• the value of new mortgages decreased by R8.40 billion (13.40%) quarter-on-quarter and increased by R15.33 billion (39.39%) year-on-year
• secured credit, dominated by vehicle finance, decreased by R6.57 billion (13.82%) quarter-on-quarter and increased by R1.87 billion (4.77%) year-on-year
• credit facilities increased by R1.91 billion (10.78%) quarter-on-quarter and by R440.37 million (2.29%) year-on year
• unsecured credit decreased by R2.69 billion (11.77%) quarter-on-quarter and by R5.18 billion (20.47%) year-on-year.

According to the NCR, the decrease in new mortgages and secured credit is seasonal, as the majority of consumers do not buy houses during the first quarter of the year, mainly due to the pressure of schools opening and other related financial pressures during January.

The increase in credit facilities in recent quarters is due to more and more credit providers offering revolving personal loans and credit cards, which is more popular than unsecured personal loans.

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Outstanding balances

The trends for outstanding credit balances between January and March 2021 were that:

• the mortgages debtors book increased by R27.10 billion (2.67%) quarter-on-quarter and R54.05 billion (5.47%) year-on-year
• the secured credit debtors book increased by R1.55 billion (0.34%) quarter-on-quarter and R8.43 billion (1.88%) year-on-year
• the credit facilities debtors book decreased by R498.01 million (0.19%) quarter-on-quarter and increased R167.49 million (0.06%) year-on-year
• the unsecured credit debtors book decreased by R3.46 billion (1.60%) and R10.92 billion (4.88%) year-on-year.

The NCR says although new credit might have decreased, new loans were still recorded and because mortgages have a longer life cycle, the addition will lead to a book increase. The same is also true for the increase in the secured credit debtors.

The decrease in the credit facilities debtors’ book simply means that consumers used less credit by the time credit providers reported data to the NCR and therefore it is mainly a timing issue.

Regarding the decrease in the unsecured credit debtors’ book, the NCR says new unsecured credit has been decreasing in recent quarters, which resulted in the decrease in the debtors’ book, because existing consumers are repaying their debts. Less is coming in and more is going out.

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Credit bureaus

Credit bureaus held records for 27.53 million credit-active consumers, an increase of 0.44% compared to the 27.41 million in the previous quarter. Consumers classified ‘in good standing’ increased by 216,007 to 17.01 million consumers, 61.80% of the total number of credit-active consumers, an increase of 0.84% quarter-on-quarter and a decrease of 0.78% year-on-year.

The number of credit-active accounts decreased from 90.47 million to 85.09 million at the end of March, while the number of impaired accounts decreased from 23.85 million (26.34%) to 20.18 million (23.71%) in March, a decrease of 3,650,424 quarter-on-quarter and increased by 296,911 year-on-year.

Credit bureaus issued 584,437 credit reports, with 493,538 (84.45%) issued free of charge and the balance of 90,899 (15.55%) issued at a cost. A total of 25,404 disputes were lodged where consumers disagreed with the information held on consumer credit records, a decrease of 4.50% quarter-on-quarter and 35.80% year-on-year.