NHT Mortgagors to Benefit from Lower Interest Rate

National Housing Trust (NHT) mortgagors are to benefit from a reduction in interest rates as of May 1, 2010, along with several other measures, aimed at making it more affordable to own a home.
In his presentation in the 2010/11 Budget Debate today (April 20), Prime Minister, the Hon. Bruce Golding, announced that mortgage rates will be reduced by one per cent across all four income bands.
He added that first-time applicants who are 55 years and over would qualify for a two per cent reduction in their mortgage rates if they have contributed to the NHT for not less than 10 years, and fall in the three per cent, five per cent and seven per cent income bands. This means they will pay one per cent, three per cent or five per cent interest rates, depending on their income band.
The Prime Minister also noted that qualified applicants for scheme units and serviced lots will no longer be required to pay the minimum five per cent deposit, adding that many first-time buyers are unable to find the downpayment for a house, even when they can manage the mortgage payment.
They will, however, be required to pay the legal and professional fees associated with the mortgage agreement.
There is also to be an increase in the maximum mortgage loans allowable as of May 1, 2010, with scheme units, open market purchases and build-on-own land moving from $3.5 million to $4.5 million. The loan ceiling for serviced lots will move from
$1.2 million to $1.5 million; construction loans will be increased from $2.3 million to
$3 million; and home improvement will go from $1.2 million to $1.5 million.
Mr. Golding said appropriate adjustments will be made in cases of co-applicants.
Another measure being implemented by the NHT is its subsidy programme. Under this programme, the NHT will allocate 40 per cent of its pre-tax surplus at the end of each quarter to provide subsidies to selected mortgage applicants who earn less than $10,000 per week and who have been contributing to the NHT for not less than 10 years. The existing points criteria will be used in selecting applicants for this benefit.
The Prime Minister said that many NHT contributors cannot buy a house because their income is not enough to qualify them for the mortgage.
“We will be introducing a Deferred Mortgage arrangement whereby that applicant can qualify for a mortgage equivalent to 60 per cent of the price of the house. The remaining 40 per cent will be converted into a deferred mortgage to be repaid or refinanced at scheduled stages in the life of the first mortgage. This is a limited benefit and will apply only to 10 per cent of the units in any one scheme,” he pointed out.
Mr. Golding noted that the mechanism will apply to scheme units only.
In addition to these measures, the moratorium for persons accessing build-on-own land and construction loans will be extended to 12 months, up from six months.
To encourage private developers to build affordable houses for NHT beneficiaries, the interest rate charged on interim construction loans will be reduced from eight per cent to three per cent. This will apply only in relation to two-bedroom units delivered at a cost not exceeding $5.5 million and studio units not exceeding $3 million. These loans will be for a maximum of three years.
The measures are among several outlined in a Ministry Paper 2010 tabled in the House today. Other measures outlined in the document include a mechanism for application for additional funds for open market loans to mortgagors who did not access the full loan ceiling at their initial application for the loan; and the use of alternative property as security where loan applicants may provide and use an alternative property to secure a build-on-own land loan where the title is not available.
Mr. Golding said that in facilitating these changes, it is important to ensure that the sustainability of the Trust is not impaired.
“When the higher-end mortgage rates were increased in 2008, it was because the average interest rate charged on NHT loans were reduced below its cost of funds. In order to ensure that we don’t return to this untenable position, the interest paid on contributors’ refunds will be reduced from three per cent to two per cent,” he explained.
The reduction in interest rate of contributor refunds will be implemented on May 1, 2010, while all other changes to the lending policy will come into effect on July 1, 2010.