Housing loan interest rate cut by 2% |03 April 2009

“This will mean a monthly reduction of, for example, over R560 for those who took R350,000 loans,” he said.

“In December last year we announced an increase of interest rates from an average of 7% to 13%, but after the exercise we did with the Ministry of Finance to see how the burden on clients can be reduced, and with help from the government, the HFC is able to reduce its interest rates for the main category of loans from 13% to 11%.

“That will affect land loans, the normal and second housing loans as well as house extension loans, but the interest on our home improvement loans will remain at 10% and on commercial loans it will stay at 16%.”

He said people have been asking why the HFC has been saying it cannot reduce its interest rates when the commercial banks have been reducing theirs.

“As we have pointed out before, the HFC borrows money at 15.25% interest rate from the Nouvobanq, but we are charging our clients 13% so we are not passing on the entire increase that was imposed on us by commercial banks,” said Mr Bastienne.

“We have been absorbing some of it, but now we cannot because Nouvobanq is not reducing its interest rates further. However, government has been able to make certain savings here and there and is now able to support the HFC so as to reduce its interest rates.”

The Ministry of Finance said the HFC plays an important role in ensuring government fulfils its promise of affordable housing for its citizens.

“Within this scope, the government has announced that it will use any fiscal space it may have from time to time to assist the HFC financially which, in turn, may be able to lower interest rates for its clients,” it said in a press release.

It said the HFC will be making reductions in its lending rates, especially for those clients who have genuine difficulty in repaying loans at higher levels.

“Government welcomes the move by the HFC, which follows a similar pattern of reduction in lending rates by other financial institutions given the current market and monetary situation,” said the ministry.

“It reflects the strong commitment to ensure that the reforms do not unduly affect the quality of life of our citizens and that it will play its role to bring down the cost of living and hopefully pass on any benefits of its fiscal adjustment programme.”