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Existing mortgagors of the National Housing Trust (NHT) will pay less, as a result of the revised interest rate the Trust now offers.
At a press conference held today (July 21), at the Four Seasons Hotel in Kingston, Earl Samuels, Managing Director of the NHT explained that, “all existing mortgagers will benefit as their interest rates will also be reduced”.
He pointed out that those who were currently paying 9 per cent, if they were earning under $20,000 per week, would now pay 7 per cent, while those earning above $20,000 per week would now pay 8 per cent.
The Managing Director said that those paying 7 per cent would pay 5 per cent; those paying 4 per cent would pay 3 per cent, and some persons who were paying 4 per cent could possibly see their interest rates go as low as 2 per cent.
In the House yesterday (July 20), Prime Minister P.J. Patterson announced increased benefits to all contributors to the NHT.
Mr. Samuels encouraged existing mortgagors to continue to pay their usual amount, so their repayment time would become shorter. He said that with the improved benefits, the NHT was expecting a 20 to 25 per cent increase in the number of persons accessing loans from the Trust, which would result in expenditures and granting of new loans increasing by $2.5 billion to $3 billion per year. He added that the NHT has the financial capacity to meet this increase in demand.
“There is a cost to the NHT and we are expecting that our interest income from our mortgages will be decreased by about $550 million per year. However, we think that with the increase in the new loans, this will somewhat be cushioned and even without the income from new loans, the NHT still has the capacity to grant the new loans without putting the financial viability of the NHT at risk,” he said.
The last time the NHT revised its lending rates or loan limits was in 2003. Since then, Mr. Samuels explained that construction costs have gone up considerably, resulting in significant increases in housing cost. The cost of a studio unit was now in the region of $1.4 million, up from $1.17 million at the time when the loan amount was last increased. A two bedroom unit that used to be sold for $2.4 million on the open market was now in the region of approximately $3 million.
“So you can see that the NHT loan limit of $1 million for a single applicant and $2 million for co-applicants was just not giving persons sufficient help to buy their home. Our lending policy was therefore urgently in need of review and it was for that reason why the Prime Minister mandated the Board of Directors and management of the Trust to review our policies,” he informed.
As of August 15, as announced by the Prime Minister, the limit for non-homeowners has increased from $1 million to $1.5 million for single applicants and from $2 million to $3 million for co-applicants for purchasing on the open market, build-on-own-land or the purchase of a scheme unit.
Mr. Patterson said that serviced lot loans would be increased from $450,000 to $600,000 per single applicant and from $700,000 to $800,000 for co-applicants.
Home owners or home improvement loans have been increased from $400,000 to $600,000 for single applicants and from $800,000 to $1.2 million for co-applicants.
Mr. Samuels pointed out that the NHT has also seen an increase in the number of applications for contribution refunds, and has been responding to these requests in a timely and efficient way. “Over the past six months we have made contribution refunds to more than 55,000 contributors,” he said.