Mortgage lending rates too steep

Published: 09 January 2018

The country's mortgage lending rates are still too high, a scenario that is limiting the number of ordinary people who can access mortgage finance, an expert in the industry has said.

Real Estate Institute of Zimbabwe (REIZ) president Mike Juru, said the lending rates, tenure of the mortgage, minimum deposit required and repayment, make the mortgage market steep in the country compared to regional economies.

"The current mortgage lending rates of 12 percent per annum over a 10 to 15 year period on a United States dollar is quite steep compared to say South Africa, which attracts interest of around 10 percent over 25 years being charged on the Rand. That alone makes our repayments high.

"In other economies, it is possible for one to make a choice of either purchasing a house through mortgage or rent a property with repayments and rentals being in the same range," said Mr Majuru.

Most mortgage lenders require a 25 percent deposit of the value of the property that is required as precondition to the mortgage offer. However, the challenging economic environment also makes it difficult for the lower to middle income earners to save enough for the deposit condition.

"In a nutshell, the issues on mortgage finance hovers around the interest rates, the loan period or tenure, the 25 percent deposit, low levels of income, proof of employment and title deeds," said Mr Juru. He added that, the initial deposit needed to be lowered or completely removed to allow more home seekers access the mortgages.

In light of this, mortgage lenders also needed to source other cheaper funds on longer terms that will reduce the interest rates and repayments for borrowers. Following the boom in the informal sector, some financial service providers have stepped in with mortgages for the low to middle income earners, as well as civil servants as part of efforts to provide affordable funding for the market that has for years been excluded.

Financial services groups such as GetBucks and the People's Own Savings Bank (POSB), have launched mortgage facilities to cater for the informal sector, civil servants and the low income earners while other mortgage lenders have increased tenure to 25 years from 10 years. This is expected to help ease the ballooning national housing backlog, estimated at 1,2 million units and nearly half a million for the capital — Harare alone.

"Mortgage lenders require proven income in the form of a salary reflecting in a bank account, with the bulk of people employed in the informal sector, the condition limits the number of people who can access mortgage finance," said Mr Juru.
- zimpapers

Tags: Mortgage,