MoneyWeb (Phakamisa Ndzamela) 06 July 2011 20:12)
First National Bank is seriously evaluating whether lending at prime is still a viable option for Home Loans and may soon add a percent to the cost of its borrowing rate for most new customers seeking new home loans and to existing customers wishing to take on further loans.
The rethinking comes as the cost of funding and the rate at which the bank borrows is becoming more expensive for the long term.
“We have to revaluate the rate at which we are offering home loans, partly because of the cost of raising money from the market … we should on average be at prime plus or prime plus 1.5% or 2% … It is imminent and we have to make the change,” CEO of FNB Home Loans Jan Kleynhans told Moneyweb.
“We believe home loans are still under priced and we believe it’s going to change. We don’t think it’s sustainable at the current levels.”
Asked if FNB was not worried that it would lose customers due to the adjustments in the lending rate for home loans, Kleynhans said:
“There is that risk but if input costs are too high then we have to make do with those tough decisions and face reality. We have made significant price changes before and the market followed and made the adjustments. We think it will happen again.”
However, a banker from another of the big-four told Moneyweb that they had already repriced at prime-plus.
Kleynhans added that everybody knows about Basel III. In most market segments, consumers need credit first and then looking at the rate offered by the bank. The demand for credit is a bigger issue than what the cost of credit is, from a consumer perspective, and that’s why we think it’s time to make this next adjustment.”
To read the full article on Moneyweb, visit this link
