The National Credit Act No. 34 of 2005 (NCA) was introduced by the South African government mainly to bring about accessibility to credit markets, protect consumers from malpractices and market abuses by credit providers and reduce consumer over indebtedness. As a result, credit providers are compelled to apply stringent rules and regulations when assessing a credit consumer’s affordability prior to granting home loans. This study aims at investigating the impact of the NCA on the affordability of home loans within the Pinetown metropolitan area. The literature review presents an overall view of affordability of home loans in developed and emerging countries and also provides an in-depth explanation of factors that affect affordability of home loans in South Africa. The predominant factors, amongst others that hinder the housing market, are: an increase in house prices; elevated interest rates and household debt which include inflation, transportation cost and low wage increase. A mixed methods approach was utilized for the research, analyzing both quantitative and qualitative data. Respondents (home loan borrowers) completed a questionnaire by indicating if assessments were conducted in terms of their affordability prior to the approval of their home loan and their view on the impact that the NCA had on their home loan. The data suggested strongly that credit providers had conducted proper credit and affordability assessments prior to granting home loans and that most home loan borrowers’ level of debt had remained stable since acquiring their home loans as they continue to meet their debts. An overall analysis revealed that the application of the NCA had a positive impact on the affordability of home loans in the research area and that compliance with NCA, when granting credit, resulted in the reduction of reckless lending, a decline in the level of consumer indebtedness and a reduction in payment default.
The National Credit Act, 2005 (NCA) was introduced to create a more stable credit market and is applicable to all credit transactions. One of the main objectives of the Act is to establish new and improved rights for credit consumers. As a result, credit providers are obliged to comply with the NCA and enforce the new and improved rights. The purpose of this research paper is to determine if the NCA has established new and improved rights for home loan borrowers. The study utilised a mixed methods approach. Using a convenience sampling technique, a sample size of 250 respondents was used. The findings of the study revealed that borrowers rights are being enforced by credit providers by maintaining confidentiality, providing information to home loan borrowers on a regular basis and, most importantly, ensuring that home loan borrowers are well informed prior to entering the home loan credit agreement.
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