Despite Government Subsidies and Fair-Lending Laws
Twenty-five years since the implementation of the Home Loan and Mortgage Disclosure Act of 2000 — designed to promote fair lending and transparency in South Africa’s housing finance sector — first-time home buyers still face structural discrimination in order to access affordable credit from traditional financial institutions.
YOU CAN END UP PAYING UP TO 32 % MORE FOR YOUR PROPERTY
A bank will never call a home owner and offer a lower home loan rate, even if the Property value has increased or the buyer’s credit profile has improved.
Most home owners patiently sit and wait for the Reserve Bank to reduce the lending rates on home loans, but they do not realise it is in their own hands and power to negotiate a low home loan interest rate,
says Meyer de Waal, director or MDW Cape Town Inc Attorneys.
The Act, together with national awareness campaigns and roadshows led by the National Department of Human Settlements (NDHS), aims to ensure that all South Africans, especially low- and middle-income earners, gain fair access to home loans.
However, evidence from recent property transactions facilitated by the property team of MDW Cape Town Inc Attorneys indicates that banks are still charging first-time buyers excessive interest rates, sometimes as high as prime plus 1.5% to 2%, even when these buyers make significant upfront contributions through First Home Finance subsidies.
With new digital tools such as Open Banking and real-time affordability verification, lenders would have no justification for ignoring verified subsidy contributions or improved borrower profiles as borrowing practices would transparent and in the public domain.
Under the First Home Finance Programme (formerly known as the FLISP subsidy), qualifying first-time buyers receive a government subsidy of up to 25% of the purchase price — for example in a current property development in Mossel Bay ,on a property sold for R429 000, the subsidies ranged between R68 000 to R148 000. The average subsidy amount for 16 property transactions were +/- R108 000.00.
This subsidy is intended to act as a deposit, reducing the buyer’s loan-to-value ratio (LTV) and therefore lowering the lender’s risk.
However, all the financial institutions continue to ignore the subsidy as a form of buyer equity, instead treating it as an external grant. This approach effectively negates the subsidy’s purpose and leaves first-time buyers paying higher-than-market interest rates on their home loans.
In this Mossel Bay development, one financial institution valued the replacement value of one of the units sold for R429 999 at R551 000.00, but yet continued to impose very high interest rates.
“This practice undermines government’s housing objectives,” says Anele Matakane, one of the sales representatives of MDW INC, involved in the Mossel Bay property sales and who is also monitoring housing finance trends. “The subsidy is not just financial aid — it is a tangible contribution to reduce the risks of lending and should be recognised as such when calculating lending risk.”
A schedule of 16 property transactions recently reviewed highlights the issue and each case shows a significant deposit contribution from the First Home Finance subsidy, yet the corresponding home loan interest rates remain far above prime.
The ongoing disregard for the subsidy’s impact on loan to value calculations raises questions about compliance with the spirit of the Home Loan and Mortgage Disclosure Act, which requires transparency and fairness in the provision of housing credit.
The NDHS and relevant oversight bodies are urged to investigate this matter urgently to ensure that financial institutions align their lending practices with both the law and government’s broader goal of enabling affordable homeownership for all South Africans.
The schedule of the high interest rates were presented to an official of the Department for investigation and their feedback is awaited.
“These findings will also inform ongoing discussions with the financial sector and policymakers on how Open Banking data integration can bring transparency to affordability assessments and prevent future mispricing.”
CAN YOU SWITCH YOUR HOME LOAN?
Many current home owners may feel stuck and do not know how to start with the approach and negotiations with their own bank to explore the possibility to reduce their home loan rate.
The best advice I can give, says De Waal, is to first establish if you are in a strong position to demand a lower interest rate on your home loan.
A comprehensive free service is available to check one’s credit score, affordability and current property valuation. Armed with such information, one can approach your own bank for a better and lower interest rate.
If your own bank is not willing to accommodate a lower interest rate, then nothing stops you to approach a competitive bank for a lower and better interest rate.
These individual actions also contribute to broader reform. Every homeowner who challenges unfair pricing strengthens the call for a fair, transparent lending ecosystem — one where verified data, open banking, and government support work together to make homeownership truly affordable.”
CHECK ONLINE
One can make use of the free online check if you are able to renegotiate your home loan rate – click here to sign in https://switchmyhomeloan.com/
Meyer de Waal
04 November 2025
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