The information in this article is courtesy of Business Report(Mortgage stress escalates as negative equity takes hold – 17 February 2009)
According to Auction Alliance, the number of mortgage bondholders in South Africa experiencing difficulty in paying their bonds escalated from 8000 in the second quarter of last year to 35 000 in the fourth quarter. These bondholders are defined as being more than four months in arrears on their payments.
Real Levitt, chief executive of Auction Alliance says that 80% of these bondholders are likely to sell or lose their homes – voluntarily or forcibly.
One in 15 homes is in negative equity, where the value of the outstanding balance on the mortgage was higher than the current market value of the home. Levitt added that such bondholders were caught in a debt trap. This has increase to one in 20 homes two quarter ago.
Levitt explained that negative equity figures were based on homes that were currently on the market, but should be treated with caution because they were not representative of the total housing market. He added that South Africa has joined an international landslide in the property market since the market is now in the third quarter of a technical recession that has intensified since November 2008.
Aggressive interest rates, according to Levitt, could be the answer to alleviating the severe mortgage stress.
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