Why mortgage lending remains stagnant despite property market recovery

While the property market is in recovery mode, the recent interest rate cuts have not significantly expanded mortgage lending. 

This has afforded sellers some wiggle room to raise their asking prices, says Siphamandla Mkhwanazi, the senior economist at FNB. He says potential homeowners should continue looking for opportunities.

“That said, current homeowners have been relatively reluctant to list their properties for sale. Rising purchasing power should help boost overall sentiment, but credit prudence remains a key feature,” Mkhwanazi says in response to this publication’s recent enquiry.

In the FNB Property Barometer for August 2025, FNB says that despite improving demand and rising prices, mortgage lending remains subdued, indicating that the recovery is not yet credit-driven.

According to South African Reserve Bank (SARB) data, outstanding mortgage balances grew only 2.0% y/y in July, a rate that has remained in a narrow range for several months.

It says this reflects a muted expansion in housing credit, suggesting that banks are not significantly increasing new mortgage lending, and/or consumers are cautious about taking on more housing debt. Either way, credit prudence continues to dominate.” 

In its outlook, the bank says a key question going forward is whether the credit cycle will begin to reinforce the housing market recovery.

“If interest rates remain stable or decline further, improved affordability could encourage more buyers to finance purchases, and banks may become more willing to extend home loans. A pickup in mortgage lending would provide an additional tailwind to sustain house price growth.”

Absa Home Loans recently told this publication that with the repo rate likely to remain unchanged in the near term, property prices may stabilise while borrowing costs are unlikely to rise. It said this  stability may attract more buyers to the market, potentially leading to a gradual increase in property prices.

Mkhwanazi told this publication that the MPC must balance inflation control with support for growth. He says consumer finances remain fragile, and over-tightening could stall recovery.

“Ignoring inflation risks, however, could reignite price pressures. A balanced approach is essential to avoid harming both the property market and the broader economy.”

Meanwhile, the Housing Development Agency (HDA) reaffirmed its role as a key supporter of development and a catalyst for sustainable human settlements.

It successfully hosted a high-level stakeholder engagement discussion under the theme “Building Partnerships for Effective Solutions” in KwaZulu-Natal last week.

The government agency says this marks the second leg in a series of strategic engagements that the HDA is rolling out across the country, aimed at deepening collaboration, building sustainable partnerships, and shaping innovative approaches to human settlements delivery in the Province.

This engagement marks the second in a series of nationwide dialogues aimed at strengthening collaboration, forging sustainable partnerships, and shaping innovative approaches to human settlements delivery.

The uMhlanga session convened leaders from government, business, and the development sector to explore bold strategies for addressing KwaZulu-Natal’s housing and settlement challenges.

Reflecting on the session’s success, HDA regional manager, Bosco Khoza, said: “Projects like Umlazi Regeneration, Harding, and Moddelkoof – alongside our ability to implement emergency housing interventions for flood-affected families – showcase the HDA’s ability to combine scale, speed, and impact. KwaZulu-Natal offers a unique opportunity to demonstrate how integrated human settlements can drive inclusive growth, attract investment, and build resilience.

"Our role is to be more than developers – we are connectors, catalysts, and trusted partners for both the public and private sectors.”

He added that the challenges of human settlements in KwaZulu-Natal require bold thinking and collective action.

“Mega projects like N2 Gateway, Zanemvula have proven that the HDA can assist spheres of government to deliver at scale and with impact.

"This engagement takes our commitment further – we are not just developers for government; we are catalysts for change. The partnerships forged here will help to facilitate innovative, sustainable solutions that improve the lives of communities across the province.”

The HDA says it will continue engaging with more stakeholders across KwaZulu-Natal and beyond, ensuring that the momentum created by this engagement drives ongoing collaboration, innovation, and delivery.

By convening this dialogue, the HDA says it strengthened its visibility among high-level stakeholders and reinforced its position as a forward-looking partner, driving scalable, impactful and sustainable human settlements solutions across South Africa.

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