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Mortgage guarantee fund ‘liberates’ buyers
Developers should be jumping for joy at the prospect of thousands of new home buyers recently “liberated” by the introduction of a state mortgage guarantee fund, says RealNet chief executive Tjaart van der Walt.
“The fund is specifically intended to give the banks more confidence about granting home loans to people earning R3 500 to R9 000 a month – and there are thousands of salary-earners, such as police, teachers and nurses in this bracket who were previously shut out of the market.
“However, there is a limited amount of stock available that would be affordable for such buyers and that should spur developers into action. At current interest rates, people earning R3 500 a month, for example, could probably only afford bonds of around R108 000. Assuming they pay a 10 percent deposit, that would mean they could possibly buy properties costing around R118 000.”
At the upper end of this scale, people earning R9 000 a month might be able to buy homes costing around R310 000, and a couple who pools their mid-range salaries for a total of R15 000 a month, say, could probably buy a R500 000 home, depending on what other debts they have, such as car repayments or HP instalments.
“It is important to note,” says Van der Walt, “that the introduction of the mortgage guarantee fund does not override the provisions of the National Credit Act, and that banks are still going to apply the strict credit qualification criteria stipulated in this legislation, no matter what income bracket potential buyers fall into.
“Nevertheless, we believe there will shortly be much more action in the inner city and township markets, which will stimulate new development initiatives in other areas. This will help create jobs and, in turn, even more potential home buyers.”
Meanwhile, he says, all potential buyers should be doing their utmost to save the biggest deposits possible. This is not so that they can afford more expensive homes, but so they can keep their bond repayments down and give themselves some budget leeway if interest rates should start to rise again.
“We also believe government could be doing even more to encourage home ownership, for example introducing tax-relief on bond repayments as is available in the US.”
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