Growth in mortgage advances slowed down further in July, Absa senior property analyst Jacques du Toit said on Monday.

He was commenting on data released earlier by the SA Reserve Bank that showed that growth in the value of mortgage advances by monetary institutions tapered off further to 6.4 percent year-on-year in July 2009, from 8.2 percent year-on-year in June.

"This was the lowest year-on-year growth in outstanding mortgage balances since May 2000, when it was 6.3 percent," Du Toit said.

On a month-on-month basis, the outstanding balance on mortgage loans was down by 0.1 percent in July, "which was the first month-on-month decline since September 2002," he added.

Du Toit said that growth in the value of mortgage advances to households, largely related to residential property, came in at 4.7 percent year-on-year in July, down from six percent year-on-year in June.

"Based on a level of R709-billion in July, the amount of outstanding mortgage balances in the household sector had a share of 72.1 percent in total mortgage debt in July, while having a share of 69.9 percent in total credit extended to the household sector in July," he said.

With house prices deflating on a year-on-year basis since late 2008, this trend appeared to be at a lower turning point, based on the Absa house price index up to July this year, Du Toit noted.

On a month-on-month basis, house price deflation had slowed down since April this year.

Nominal year-on-year house price deflation was forecast to continue in the rest of 2009, slowing down towards the end of the year, Du Toit added.

He said on a month-on-month basis prices might rise by year-end.

"House price growth of around two percent is forecast for 2010.

"Mortgage advances growth is projected to slow down further towards the end of 2009, based on prevailing economic conditions and employment declining, impacting household income and the demand for housing and mortgage finance."

Du Toit said that against the background of an expected beginning in economic recovery later this year, together with the lagged affect of lower interest rates, mortgage advances growth was forecast to gradually improve from the first quarter of 2010.