“In the height of the property boom in 2007, around 24 percent of new home loan applications were received from applicants who generate income from their own businesses,” FNB head of sales Ewald Kellerman said in a statement on Thursday.
“Such applications where ‘self-employed’ individuals are party to the proposed loan have proportionately halved to just over 12 percent of new applications submitted in recent years, indicating a significant change in the home loans environment.”
Kellerman said that even though the figures were based on applications submitted to FNB, they were “reflective of a larger trend in new home loan applications for small business owners”.
“This trend could further help quantify the financial strain that small businesses have undergone since the 2008 recession.”
Kellerman said that even though the number of home loans for self-employed applicants was decreasing, the average bond size of the applications was more than 40 percent higher than their “salaried counterparts”.
“[This suggests…] that there is a favourable upside and a healthy risk/return trade-off for potential homeowners who decide to leave the confines of employment to generate income out of their own businesses.”
Kellerman said small business employees often had a higher chance of approval for home loans than their employers.
“In contrast to the business owner, an employee receives a payslip with corresponding deposits into their bank accounts,” he said.
“When the business does poorly in any given month, employees are usually paid before the business owner can draw his or her own salary.”
He said this made it more complex to assess “self-employed” applications as it was possible the financial information could be interpreted in a way that disadvantaged the applicant.