Pension-secured housing loans are increasingly forming a critical part of the financial sector’s housing finance armory with some 257 000 loans, valued at R 4.8 billion having been extended in the five-year period since the inception of the Financial Sector Charter (FSC) in January 2004. Proponents of the product see pension-secured housing loans as an integral part of the private sector’s housing finance solution, which offers an opportunity for low-income earners to release equity “trapped” in pension/provident funds to satisfy immediate housing needs and as a means to ultimately create wealth over the long-term. Others view these loans as the first step on the road to penury, putting people’s retirement savings at risk and in the long-term compounding the State’s burden of having to provide adequate social support for an aging population.

With the prevailing shortage of housing stock amongst South Africans who can afford housing finance estimated as affecting some 625 000 households3, coupled with the current contraction in the development of new residential property, indications are that pressures on housing supply will be exacerbated. Generally, pension-secured loans (and unsecured housing loans) have predominantly been applied to home improvement projects, rather than for the purchase of new homes, as the average size of these loans are relatively small. With increasing numbers of South Africans not being able to afford to purchase new homes4, it is not inconceivable that the market will reflect a shift from individuals seeking mortgage finance for the purchase of existing or newly-built homes, to seeking funding for home improvements or enhancements to already-occupied properties, in the form of pension-secured or unsecured personal loans. Therefore, it is reasonable to assume that the pension-secured housing product will continue to exert influence on the affordable housing market as a financing option for incremental housing.