South Africans struggle to repay home loans as rates rise

South Africans are finding it more difficult to keep up with their mortgage payments as the cost of living and interest rates climb, the country's fourth-largest lender said.

South Africa's central bank has raised its key repo rate by a cumulative 75 basis points this year while inflation has remained above its 3 to 6 per cent target for much of the year.

"We are starting to see that strain that customers are under is starting to reflect in terms of their ability to make repayments in a consistent manner. And not just us, the industry is starting to sense that," said Timothy Akinnusi, the head of home loan sales at Nedbank.

The subsidiary of Britain-listed insurer Old Mutual was not seeing more defaults in Africa's biggest mortgage market, but more clients were offering to sell their homes in the event that they could not keep up with monthly payments, Akinnusi said.

The South African Reserve Bank said that although household wealth had surged as a result of rising values of financial assets, consumers remained vulnerable. South Africa's economy has slowed and is expected to grow by a relatively modest 1.4 per cent this year.

Nedbank has been on a steady recovery since its retail unit was hit by soured home loans following a 2009 recession, and its 120 billion rand (HK$84.1 billion) mortgage book now has a non-performing loan ratio of 5 per cent.