Don't bank on that bigger bond
STATE employees and others who qualify for housing subsidies face changes in the lending criteria for the purchase of new homes.
A document released by the Association of Mortgage Lenders says the criteria for establishing the size of loans for which these individuals qualify is to change on January 1.
The South African Residential Developers Association and the National Association of Home Builders have expressed concern about the impending changes. Says Victor Booth, the home builders association president: "If the banks go ahead with the new criteria, we foresee that more than 80% of the 60 000 houses a year that could have been facilitated by private developers under the previous lending criteria will simply not be built. The buyers will no longer qualify for the bonds needed to pay for them."
Civil servants, parastatal employees and people working for the major mining houses, among others, qualify for a housing allowance to which up to 25% more of their actual earned income is added to determine the size of their monthly repayments, thus facilitating a bigger bond amount.
The new lending criteria will result in the allowance amount being added to the employee's salary before the monthly repayments are calculated (at a maximum of 30% of the total sum), thus greatly reducing the bond amount. A person who earns, say, R2 500 a month and receives a R780 monthly housing allowance now qualifies for a loan of R85 670 (over 20 years at 19,25% interest). The new criteria will effectively reduce the maximum bond to R60 000.