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Cabinet has approved further amendments to the National Housing Trust’s (NHT) Housing Benefits Policy, which will result in a reduction in interest rates on interim financed loans to seven (7) to 12 per cent from a range of eight (8) to 12 per cent.
Minister of Information and Development, Donald Buchanan, who made the announcement at the weekly post-Cabinet press briefing held on (Aug. 14) at Jamaica House, explained that if the cost of a proposed housing solution is less than $5 million, interest rate will fall by one per cent from eight to seven per cent.
Where the housing solution is greater than $5 million, but less than $10 million, the rate of interest applied will be nine per cent, a reduction of three per cent from the old rate of 12 per cent. However, if the house costs more than $10 million, the interest rate will remain at 12 per cent.
“Primarily, this amendment affects contributors, who are able to afford housing units costing over $5 million but less than $10 million. It is the opinion of the NHT that a large percentage of demand lies within this affordability range with respect to young professionals,” Mr. Buchanan said.
Previous to the amendment, the NHT only operated two interim finance loans – the first for units costing less than $5 million, which attracted an eight per cent interest rate and secondly, for units costing more than $5 million with interest rate of 12 per cent.
In the meantime, it has been agreed that the NHT’s points system should be adjusted to align with the approved change in interest rates and income bands.
The move, which will benefit low income earners, means that contributors earning between $3, 200 and $7, 500 per week will pay an interest rate of two per cent and can accumulate a maximum 110 points.
Persons who earn between $7, 501 and $10,000 per week will pay four per cent interest and can accumulate a total of 90 points; those earning between $10,000 and $20,000 per week will pay five per cent interest, but can only build up a total of 80 points; while contributors earning more than $20,000 per week pay interest of six per cent and can collect a total of 70 points.
“In addition to allocating different points for each income band, the principal objective of this change is to skew the point requirement for being selected to purchase a new scheme solution in favour of contributing members with smaller incomes,” Mr. Buchanan noted.
He added that “the focus of this change is not to expand the point award for lower income contributions, but rather to eliminate overlapping point allocations across bands and to maximize the differential in point allocations from 30 to 40 points.”
In April, Cabinet approved changes to loan limits and interest rates. These approved amendments to the Housing Benefits Policy were affected as of July 1, 2007.