Fourie says inflated house prices were a significant driver of the US’s subprime mortgage crisis in 2008, as individuals took out mortgages larger than the real value of their homes.
“We lend against income and expenses, so you can’t have an inflated situation. There’s a fundamental difference between what happened in the US and ourselves,” Fourie says.
Capitec says it has strict affordability assessments and prudent provisioning.
It provides 8% for loans that are up to date, 46% for clients behind with one instalment, 74% for two instalments and 87% for three instalments.
After 90 days in arrears, it writes the loan off.
However, it’s doubtful that all other unsecured lenders are as conservative.
African Bank (Abil), for example, would only start to provide for a loan once someone was over three months in arrears, whereas Capitec is 100% provisioned, says Jean-Pierre Verster of 36ONE Asset Management.
Verster says in the unsecured lending market consumers will take out a loan to pay another. Since there is an overlap between Abil and Capitec clients, he’s waiting to see what the vintages will be of the larger, longer-term loans issued by Capitec now that Abil’s credit tap is but a trickle.
Since banks have not created a model to address the housing need in South Africa, unsecured lending is vital, stresses Fourie. He says 93% of mortgages are above R350 000, with mortgagee numbers stagnant at 1.8 million.
“There is a need for R500 000- and-lower mortgages and no one is in that particular market. The only way to get credit is in the unsecured market,” he points out.
– An earlier version of this article was headlined “Investec: What crisis?”. It has since been corrected. The Citizen apologises for the error.