The first Housing Finance Forum was held yesterday, in Johannesburg, under the auspices of the National Housing Finance Corporation (NHFC), a development finance institution responsible for facilitating access to housing finance for low- and moderate-income communities.

CEO of the NHFC Samson Moraba said the establishment of the Housing Finance Forum stemmed from a need for vibrant debate among housing finance practitioners to realise models that are tailored to suit the South African low-income housing market.

“The challenge for those in the housing finance sector is to adopt global best practice in our country’s emerging market, while taking cognisance of our unique local features.

“Through open discussion and debate, we will be able to attain creative solutions for sustainable low-income housing finance models,” Moraba explained.

The forum deliberated whether the mortgage instrument was relevant to low-cost housing.

Simon Stockley, CEO of South African Home Loans, argued that the housing finance sector should not focus on the mortgage instrument in itself, but on the funding mechanisms underpinning it.

“The mortgage product has relevance only in relation to mature, as opposed to emerging, markets,” said Stockley.

He explained that a mortgage bond is essentially a highly-sophisticated product, which also comes at relatively high costs.

“I believe that the lower-income market requires a slightly more innovative mechanism, which is currently unavailable in the South African market, because there is lack of competition in the mortgage market,” he added.

He pointed out that, currently, competition between mortgage products is restricted, as four big banks are monopolising the market.

After researching alternative funding mechanisms, Stockley and an association of venture capitalists established South African Homeloans, the first discount home loan specialist in the country, which uses the securitisation model to raise capital.

“We assemble parts of mortgage loans and sell off income from mortgage loans directly into the capital market. The securitisation model has been highly successful for us, since we have managed to grow our market share from zero to 7% per month, within a space of four years,” he explained.

David Porteous, head of Finmark Trust, a nongovernmental organisation aimed at making financial markets work for the poor through the sustainable expansion of access to financial services, including housing finance, said there has been a swing from the mortgage to the nonmortgage model, and added that there should be a middle ground between the two models to serve the needs of the low-income market.

“There is always room for nonmortgage products, but mortgage has relevance because it is the only way to answer the affordability question in a sustainable fashion,” he said.

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