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(Capitec)
- Capitec offers mortgage loans, through the mortgage finance company SA Home Loans, since 2014.
- This week it launched a revamped product, which it says will be more affordable, with a 5-minute application process.
- Unlike other home loans, the Capitec mortgage does not track the prime or repurchase rate, but is tied to the Jibar.
- For more articles, go to www.BusinessInsider.co.za.
Capitec is betting on a new mortgage loan product, with more competitive interest rates and a 5-minute application process.
Capitec began selling home loans, through mortgage finance company SA Home Loans, in 2014, but says the new offering is “a whole new product.”
Clients’ home loan agreements will remain with SA Home Loans, which will also decide whether to extend a home loan to an applicant.
But the product is branded for a Capitec home loan and the application process is done through the bank’s website.
Capitec saw a growing need among its customers for more affordable home loans, says Francois Viviers, the bank’s marketing and communications executive.
Defying predictions of a pandemic-induced drop, the housing market is experiencing a mini boom, with applications for bonds, especially among first-time buyers, rising after interest rates fell to a 50-year low .
But home loans are not part of Capitec’s immediate strategy, instead it remains focused on unsecured loans (including loans, credit cards and its recently launched revolving access financing option).
Therefore, the new home loan product will continue to be offered through SA Home Loans, and Capitec brand home loans will not be included in the bank’s balance sheet.
But Capitec worked with SAHL to redesign the home loans offered to its clients to be more in line with its other products.
This means that emphasis was placed on being more affordable. Viviers believes that the interest rates offered on these home loans, which start at 6%, one percentage point below the prime rate, will be in line with what other banks offer.
But the big differentiator will be the savings in transaction costs – clients get up to a 50% discount on attorney fees through SA Home Loans.
In addition, the application process has been completely revamped and Capitec says that the home loan application can now be completed online in five minutes.
READ | Capitec has quietly started making loans for older used cars, but not everyone is a fan.
“Previously, the application processes required a lot of paperwork and time. We have simplified this by offering potential clients a simple 4-step online application that takes less than 5 minutes to complete. There is no need to have any documents on hand and questions are easily answered through multiple options or simple entries like first name, last name and income, ”says Viviers.
Home loan applications can also be tracked in real time online.
Capitec offers mortgage loans of up to R5 million for 30 years. Government employees, if they apply for a new home loan or trade in their existing bonds, could qualify for a discounted interest rate. To qualify, you must use the government employee housing plan (GEHS) suspension order.
Unlike most other home loans, Capitec mortgages follow the 3-month Jibar (Johannesburg Interbank Agreed Rate), not the repo or prime rate.
The Jibar is determined independently in the market and generally anticipates what will happen to the buyback rate. The two rates move in the same direction, but the Jibar can go up or down a bit before the repository.
Interest rates on home loans “reset” each quarter, explains SA Home Loans. “Jibar is reviewed on these quarterly readjustment dates, and the latest Jibar rate quoted in the market is used to determine the interest rate for existing clients for the following quarter. The effect on you is that your interest rate will not be it will move at the same time as Prime, but only on predetermined quarterly reset dates. “
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