The non-payment of mortgage bonds in South Africa: The voice of defaulters

Abstract

The aim of this article was to provide an understanding of the reasons for the non payment of mortgage bonds in the South African context. The article starts off with a brief history on housing finance under apartheid from 1948 to 1994. It then conceptualise current housing finance to the lower end of the market (mainly for black people) in South Africa. This is followed by a literature review of possible reasons that contribute to the non payment of mortgage bonds in the South African context and a brief overview of the methodology followed during the interviews with defaulters. In the fourth part of the paper, the results from the empirical survey are discussed. The results of the survey confirm previous research that financial reasons are a fundamental factor that influences the non payment of mortgage bonds. According to the respondents, other factors that influence non payment include educational problems, political interfer ence and peer pressure, and the reaction and efficiency of the banks. The recommendations of respondents on solving the problem of non payment in clude shorter loan periods, improvement of bank management, and mortgage bond education. Reward programmes are also mentioned as a possible solution to defaulting. The study concludes that long term affordability is one of the main reasons that contribute towards the non payment of mortgage bonds. An additional conclusion is that financial institutions need to rethink their management of mortgage loans to lower income households.