Rising bond arrears: What homeowners should do if they fall behind on payments
South Africans have been urged to act quickly as more homeowners fall behind on bond payments
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South Africans have been urged to act quickly as more homeowners fall behind on bond payments, with rising interest rates and inflation pushing many closer to foreclosure.
According to home finance provider Sentinel Homes, the number of mortgage accounts in good standing has dropped from a historical average of 92% to just 88% in the final quarter of 2023.
"The latest available figure shows it is down to 88% in the last quarter of 2023. That means home loan accounts with arrears have increased by about 50% recently, and it happened in the relatively short time span of 18 months to December 2023".
"Globally, inflation has been quite stubborn, and interest rates remain high as a result. In South Africa, the repurchase rate (repo rate) of the South African Reserve Bank reached its highest level in 15 years. This means the prime rate, used to price home loans and other consumer debt like car loans and credit cards, is elevated," Renier Kriek, managing director of Sentinel Homes, said.
Kriek added that homeowners should take control of their financial situation before missing a payment, stressing the importance of early engagement with their credit providers.
“Being unable to afford your home loan instalment is not a position anyone wants to find themselves in. Steer your own boat rather than leaving it to the vagaries of the foreclosure process. Not taking control of the situation can be financially disastrous".
Kriek’s advice for homeowners facing financial stress:
- Prevention is better than cure: Arrange with your credit provider before missing a payment. Stick to any repayment plan and don’t over-promise.
- If you’re already in arrears: Pay something, no matter how small, to show good faith. Accounts receiving payments are less likely to face foreclosure.
- Forbearance options: Lenders may offer payment holidays, interest-only periods, spread arrears over time, or extend loan terms, especially if the financial difficulty is temporary (e.g., hospitalisation or retrenchment).
- Beware of debt counselling pitfalls: Some debt counsellors promise unrealistic solutions. Debt review may not save your home, and can restrict you from taking new debt for years
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mthobisi.nozulela@iol.co.za