Earl Samuels, managing director of the National Housing Trust (NHT), has urged developers to keep housing affordable so that NHT beneficiaries can see real benefit from the cut in mortgage rates. - File

Susan Gordon, Business Reporter

The National Housing Trust (NHT) will lose hundreds of millions of revenues when it lowers interest rates and expands loan benefits in line with policy directives to improve benefits to taxpayers who finance the agency through payroll deductions.

"It's going to cost us about $900 million based on the number of loans we have and the interest rates which have been lowered on these existing loans," said NHT managing director Earl Samuels.

The two-point rate cut on mortgage loans takes effect on July 1. The NHT is also projecting that with the new limit on mortgage loans, a 17 per cent increase from $3 million per person to $3.5 million, the disbursements will amount to $1.5 billion more, according to Mr. Samuels.

Combined, the new benefits are expected to have a near $2.5 billion impact on NHT's operations, and while the net effect of the adjustments were not immediately known, NHT is projecting depressed earnings this financial year, from $587 million to $530 million, a 12 per cent decline, according to information tabled in Parliament.

Adjustments

The adjustments to benefits for the third time in less than two years increase the cap on loan amounts available to applicants for all benefit types effective to $5 million.

Furthermore, changes are to be made to the interest rates for new and existing mortgagors.

The open-market loan has moved from $3 million for each applicant and $6 million for co-applicants, $5 million and $7 million, respectively.

The loan amount for serviced or house lot has increased from $1 million and $1.6 million, to $1.2 million for each applicant and $1.9 million for co-applicants.

A homeowner's loan is now capped at $1.2 million, a 20 per cent increase.

The revised income to interest rate band will see persons qualifying with the lowest income of $3,200 to $7,500.99 per week paying two per cent on mortgages, while the upper income band of over $20,001 per week will get home financing at six per cent, a reduction from eight per cent.

At present, NHT has 64,736 loans on its books, including 7,200 new loans that were written last year. Samuels said about 50 per cent of the loan applicants accessed the full $3 million.

"If that same percentage accesses the $3.5 million, then you are talking about another $1.5 billion," he said.

Last year, NHT disbursed some $13 billion for mortgage loans and development plans, including construction financing, while it collected under $9 billion in contributions. In other words, its expenditures ran about 45 per cent above income.

Projections for the current year also see expenditures, budgeted at $17.2 billion, running about $1.6 billion above revenues of $15.6 billion.

Strengthen compliance

"We have to insist that people service their mortgages and we are going to strengthen our compliance activities," said the housing agency boss.

Otherwise, the agency faces a depletion of the $45 billion housing fund that finances its big programmes.

Samuels also fears that, while the benefits are meant to make housing more affordable, espe-cially for buyers in the lower income ranges, the activities of developers could neutralise the increases.

"In the long run, if selling prices for houses continue to outstretch the earnings of people, the market and buyers would be no better off. The developer should provide affordable houses," he said.

susan.gordon@gleanerjm.com