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New home loan finance for under R10 000 earners
French Development Agency teams up with local bank to provide home loans for lower income earners Nedbank has launched an affordable housing finance offering to South Africans earning below R9 760, making first time home ownership a possibility. The affordable home loans stems from the announcement of a €U40-million subsidised loan agreement between Nedbank and the French Development Agency (AFD) for the provision of loans for low income housing. Jeff Lawrence, Nedbank Retail's Head of Affordable Housing says despite the government's efforts, there continues to be many challenges in the low-income housing arena, such as growing affordability issues where the costs associated with land, infrastructure and building, together with soaring interest rates, are by far out stripping the earnings of the market. The housing finance scheme is characterised by innovative and first-to-market initiatives including a once-off non-refundable grant of R8 500 for applicants. The grant will be used to cover legal and up-front home loan costs, and the remainder will help reduce the loan amount. Another feature is the 12-year reducing cap interest rate. The absolute benefit of this rate structure is that the client never loses out when interest rates move - the client's interest rate will never go up but may go down should the interest rates move below the client's original agreement rate. This mechanism ensures home owners are protected from the vagaries and uncertainty associated with a fluctuating interest rate environment. The home loan agreement period can exceed the 12-year reducing cap period and is typically 20 years. After 12 years, the agreement will revert to a variable rate, but clients can negotiate any other interest rate option that may be available at the time. Lawrence goes on to say that this initiative with AFD is designed specifically to address the affordability issues of the market by increasing opportunities for more people to qualify for housing finance. He adds that while progress has been made in the affordable housing environment, capital injections like that made by AFD assist in removing barriers to home ownership. "Nedbank is proud of its partnership with AFD as it will enable the bank to tap into new markets and play a role in making a contribution to help South Africans access home loans and financial services," he says. Nedbank will use its knowledge of the local housing market and its infrastructure to roll out the programme. The initiative will start off as a pilot programme for first time home buyers in Soweto, Soshanguve outside Pretoria, Lenasia in South of Johannesburg and Vosloorus in the East Rand. Initially only applicants wanting to buy in these pilot sites will qualify for loans, with a possibility of the initiative being rolled out to other areas within Gauteng and other provinces in the country. "What makes this initiative even more attractive is that it is not restricted or linked to any particular housing development, allowing people to buy homes of their choice, in the specified areas," he adds. Lawrence goes to explain that initially it was important to understand the concerns and needs of the market at which the home loans were targeted. "The offer has been designed to address these concerns and also prove to this market that home ownership is within their grasp." Attached to the loan will be a borrowers education programme, which is designed to assist and educate clients about the intricacies of home ownership and maintenance. These include creating an understanding of and clarifying the terms and conditions, their rights and responsibilities before signing on the dotted line, as well as addressing any questions and concerns the client might have. "As a responsible lender, we want to ensure that clients make informed decisions when entering into the home loan agreement," says Lawrence. Christophe Richard, AFD Regional Representative, says that AFD supports efforts to promote access to housing for underprivileged households in South Africa. "AFD fosters access to home ownership for populations which would normally be excluded from it and promotes support programs in partnership with private banks. AFD financing makes it possible to reduce the amount in capital borrowed by households that meet specific criteria and to implement training for borrowers. The aim is to help banks go beyond the commitments of the Financial Sector Charter. AFD tailors each program to the specificities of the bank it is working with and is very pleased of its fruitful collaboration with Nedbank", adds Richard. The affordable housing initiative comes on the back of a Memorandum of Understanding signed between the country's four retail banks and the Minister of Housing in 2005. The scheme is also in line with a commitment made by all four banks in relation to the Financial Services Charter signed in October 2003. The banks committed themselves to creating functioning housing markets in previously under-serviced areas and to make home loan finance available and accessible to low income customers. In addition the banking sector committed itself to providing R42 billion in low-income housing finance by 31 December 2008. Through this initiative, Nedbank is living up to its part of the commitment made to the Ministry of Housing and the tenets of the Financial Services Charter. http://www.realestateweb.co.za/realestateweb/view/realestateweb/ en/page196?oid=21732&sn=Detail |
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