- South Africans are entering home loan agreements without comparing offers from multiple banks.
- The law treats home loans as commercial transactions rather than advisory processes.
- A proposed disclosure could alert buyers to seek competing offers before signing.
South Africans are making long-term home loan decisions without necessarily seeing what other banks might offer, and the law does not require that they be informed of those alternatives.
This is according to Hannah van Deventer, National Director of Phoenix Bonds, who says many buyers assume they are receiving guidance when approaching their banks.
Van Deventer explains that buyers often believe their bank will act as a neutral advisor or guide. She says, “People assume that their bank is either their personal guide or at least neutral,” and adds, “In the eyes of the law, this is a commercial transaction, not an advisory process.” She describes this disconnect as an “advice gap” with financial consequences.
The cost of not comparing offers
Van Deventer refers to a case involving a couple in Centurion who accepted their bank’s offer without comparing alternatives. She says they later realised that this decision would result in more than R300,000 in additional interest over the life of their bond.
She also describes a young couple in Randpark who accepted the first rate offered to them without obtaining comparisons. She says, “They were uninformed, which is what the system relies on.”
Loyalty and pricing
Van Deventer says that many South Africans believe that a long-standing relationship with a bank will result in better home loan pricing. She states that this is not how pricing is determined.
Referring to a first-time buyer in Cape Town, she says the buyer expected a better rate due to their banking history, but this did not occur. She explains, “Loyalty isn’t a pricing factor in home loans,” and adds that different banks may reach different decisions on the same financial profile.
She further states that the difference between offers can be significant, saying, “On a R2 million bond, that difference can exceed R400,000 in total interest.”
What the law protects and what it does not
The National Credit Act provides for affordability assessments and requires disclosure of the total cost of credit. However, Van Deventer says it does not require disclosure about how pricing may differ between institutions.
She says, “The law does not require banks to disclose that their pricing is not standardised,” and adds, “Nothing requires a bank to tell a buyer that they might get a better rate elsewhere.”
She also explains that buyers often feel pressure to proceed quickly. “People sign because they’re scared the deal will fall through,” she says, referring to the urgency associated with property transactions.
A proposed disclosure
Van Deventer suggests that a simple disclosure could make a difference. She proposes wording along the lines of, “You may obtain competing home loan offers from other institutions before accepting this one.”
She says, “This is about transparency,” adding that buyers should be aware that they have options before committing to a long-term financial agreement.
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