With a steep decline in applications for housing loans in 2020 and government’s promise of 50,000 house lots by 2025, the New Building Society is seeking to increase its portfolio this year and yesterday announced a reduction in interest rates following formal approval of the lifting of the loans threshold from $12 to $15 million which had been announced in Budget 2021.
“The New Building Society Limited (NBS) wishes to places on record its pleasure to have its mortgage ceiling increased from $12 million to $15 million,” NBS Chairman Floyd McDonald remarked yesterday at the handing-over ceremony of government’s approval of the increased mortgage ceiling.
“We recognise over the coming years, that the Government will be engaging in active efforts to improve the nation’s housing stock. This is a welcomed development and one that Guyanese are looking forward to. In this regard, the NBS commits itself as an active partner to support the enhanced housing drive and delivering finance to thousands of Guyanese who will benefit from the Government’s programme,” he added.
The Chairman explained that for low-income loans up to $6 million, the new reduced interest rate would be 4% per annum, down from the previous 4.25% per annum.
For loans ranging from $6 to $12 million, interest rates have been reduced to 5.95% per annum from the respective 6.15 and 6.75 per cent, depending on the agreement.
Loans above $12 million and up to the new $15 million limit will now attract interest of 6.25% per annum. “The NBS has played and is playing a critical role in providing affordable financing to Guyanese to realise their dream of home ownership. It is in this context that we hail the increase in the mortgage ceiling and look forward to playing a more formidable role in the housing sector,” McDonald said.
“The Society is indeed appreciative of the improved ceiling approved by Government. We know that our collective efforts will redound to an improved standard of living for Guyanese,” he added.
In his remarks, Minister with responsibility for Finance Dr Ashni Singh underscored President Irfaan Ali’s commitment to distribute 50,000 house lots by 2025 which will result in increased home ownership. Singh said that yesterday’s event was reflective of a move in that direction.
“President Irfaan Ali’s government has repeated and reiterated, since our assumption of office, our firm conviction that home ownership is perhaps the single most important achievement for almost every family, and that acquiring one’s own home will perhaps for many of us be the single most important investment we would make in our entire lives,” he said.
He said that to ensure the 50,000 house lots promise is realised, the plans are to have an average of 10,000 house lots distributed each year for the next five years. “Now that we will be distributing all of these house lots – 10,000 house lots per year – I urge the NBS to take all the appropriate steps to ensure you grab an appropriate share of that market,” Singh said.
The finance minister noted that banks would also receive income tax incentives for lowering of interest rates thus making it easier for first-time home owners to build their properties which gives both parties direct benefits, and enables the economy to reap broad-based rewards.
In addition, Singh noted the employment benefits the house distribution programme would bring.
Literally
“Let us assume now, the CHPA [Central Housing & Planning Authority] rolls out their distribution; 10,000 persons get their house lot this year. Let us say 1,000 of those persons come into NBS and each takes on average $10 million. That is literally $10 billion coming in from construction alone,” he explained, while pointing out also that at least 5,000 jobs will also be created, using an average of 5 workers per house
“Consider the economic activity that that generates. That income they earn, they would spend it in the home, they would spend it in the markets, in the shops… and it goes across the economy, several times over. This is our commitment; our commitment to promoting and facilitating home ownership is because we recognise how important home ownership is to the individual family, but we also recognise how important home ownership and home construction and construction activities are to the economy as a whole… the generation and creation of jobs, the generation of income… the improvement of livelihoods. Then of course, when a person owns a home they have an asset they can go to the bank…,” Singh said.
As far as home ownership and loans are concerned, the Finance Minister recalled that before the PPP/C took office in 1992, NBS had only 125 new loans with interest rates as high as 18% per annum.
NBS would thereafter increase loan agreements and averaged about 1,000 home loans every year. By 2014, one year before the APNU took office, the bank had granted 896 new loans, having achieved an all-time high of 1,234 in 2012.
But from 2015 to 2020, according to Singh, those numbers fell with 2020 recording only 400 loans. He did not say what impact COVID-19 had on the issuance of loans last year nor did he give disaggregated figures for the period.
In highlighting his ministry’s enthusiasm and support along with NBS’ recently-granted approval and their lowering of interest rates on mortgages, Minister of Housing Collin Croal said that for especially low-income earners, a bracket that represents the bulk of allottees at CH&PA, it “means in a simple way” more accessibility for financing but also more disposable income for the homeowners and bringing affordability to first-time home owners. “ For us [government], this would mean that we can move even much faster at achieving our overall goal of not only speaking and making allocations of our 50,000 home ownership target, but see a complete package of encouraging home ownership. And that is what we are about,” he declared.
In turn, he proffered that the ceiling shift will also see greater spending and increased profitability for suppliers, while creating jobs for construction workers.
“This signals from Government’s perspective, our deep underlying intention of ensuring we bring greater relief to our home owners, potential borrowers, and us walking the walk,” Croal contended.
“It is equally important on the supply side that the enabling environment continues, as we have seen put in place by our government, to ensure we reduce as far as practicable, [the] cost for construction materials,” he added.
