Discovery Bank goes full tilt into R1.2-trillion market with home loan offering

After five years on the market, Discovery Bank has taken off the training wheels and is aiming to garner a share of South Africa’s R1.2-trillion home loan market.

The bank’s chief executive officer, Hylton Kallner, told Daily Maverick the bank had run a few home loan pilot programmes at low volumes to test the systems.

“We are confident we have a winning product. One of the big advantages is that the process is fully digitised and not onerous like the traditional home loan model — provided that you have the necessary supporting documents readily available,” he said.

In line with the broader Discovery business model, the bank will offer clients personalised rates based on their risk profiles, and clients can leverage the shared-value banking model to further reduce their interest rate by up to 1%.

Kallner said the shared-value approach could see the Discovery Bank base of more than 900,000 clients saving up to R2.8-billion in interest repayments on their loans.

“If you extrapolate that to the home loans market across the board, South Africans could save up to R12.2-billion a year,” he said.

According to ooba Home Loans, home loans had an 83% approval rate in 2023, with an average interest rate of 0.43% below prime. ooba Home Loans also reported that 75.3% of joint applications received were made by spouses, while 24.7% were purchased with business partners or relatives.

Collective buying

Mfundo Mabaso, the growth head at FNB Home and Structured Lending, said that in the current tough economic environment, affordable housing customers earning a gross salary of between R3,500 and R29,600 per month were increasingly buying homes as a collective to cope with high interest rates and the rising cost of living.

“Internal data for the six months indicate Gauteng as the leading province when it comes to collective buying, closely followed by the Western Cape. Interestingly, while collective buying is popular in the affordable housing market, there is also a lot of uptake from affluent customers and families buying holiday houses and financing semigration homes,” he said.

Kallner said Discovery Bank home loans would be available to individual and joint applicants, but would not currently be servicing the residential investment space.

Discovery Bank has partnered with South African Home Loans, which will run the back-end or administration.

“SA Home Loans has been in the market for a long time, they have the know-how, the processes and the capability. They also offer the same service for several other banks. It just makes sense financially,” Kallner said.

The introduction of a home loan offering means that Discovery Bank now offers clients the full banking spectrum, from transactional accounts to credit offerings and asset-backed finance.

Discovery Bank will offer home loans up to 100% of the value of properties, with personalised interest rates over a range of repayment terms up to 30 years. In addition to financing for new home purchases, Discovery Bank clients can also switch their existing home loans or refinance their homes.

Although all existing Discovery Bank clients can get 15% back in Discovery Miles on any purchases at partner stores such as Coricraft, Dial-a-Bed, Nespresso, Patio Warehouse and Volpes, successful home loan applicants can get up to 30% back in Điscovery Miles on purchases at these partner stores, within the first six months of their home loan.