Mortgage rates to rise yet again


Ngoni Chanakira

ANALYSTS say mortgage rates will increase again next month after the 2004 national budget presentation by the Minister of Finance and Economic Development Herbert Murerwa

last week.


Murerwa blamed inflation for the hikes but said incoming Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono would announce concrete details in his new monetary policy statement in mid-December.


The Zimbabwe Building Society (ZBS) hiked its mortgage interest rates in line with the country’s commercial banking sector, which has also increased Minimum Lending Rates.


Analysts say this is the result of the country’s hyperinflationary environment that has witnessed everything going up almost on a weekly basis.


The country’s inflation currently stands at 525,8%, up from 455,6% in September.


The ZBS in which the RBZ acquired a large stake in November 1998 – prior to the adoption of The Troubled and Insolvent Bank Policy – to protect depositors and maintain stability in the banking system is now undergoing privatization and the process is expected to be completed soon.


Last month the Central Africa Building Society (Cabs) increased their rates for potential house-owners.


ZBS, led by Ben Chikwanha said it would be increasing its rates with effect from December 1.


A wave of increases in the MLR seems to be the order of day with several banks increasing theirs almost on a monthly basis. Banks have increased their MLRs with some charging as much as 170%. Trust Bank Ltd is charging 163% while First Bank is charging 169%.


ZBS said non-owner occupied properties would have their rates increased to 85%, while low and high-density owner-occupied properties would charge 55%.


Individuals with access to the United States Agency for International Development (Usaid) loans would now have to pay 30% interest on their loans.


Industrial, commercial, vacant land and consumer loans would now repay their loans at 90%.


Religious and charitable organisations, tourist development and sports clubs will now have to fork out 90% in interest.


The increase in mortgage rates means Zimbabweans will now have to dig much deeper into their pockets for accommodation needs.


Intermarket Building Society and Beverley Building Society are understood to be working on new lending rates as well.


The RBZ says total building society assets last year amounted to $108,6 billion as at December 31 representing a market share of 12,7%, which figure remained stable when compared to the December 2001 figure of 12,4%. The average capital adequacy ratio stood at 66% with components pf Tier 1 at 53,6% and equity to assets at 24,8%.


Analysts say in response to the money market rates, which remained depressed last year, building societies were forced to concentrate on their core business of mortgage lending.


“As a consequence, profitability ratios, namely the return on assets, return on equity, and net interest margin, went down from 5,1% to 2,5%, 17,1% to 10% and 11,6% to 6,5%, respectively between 2001 and 2002,” the RBZ said in a report.


The First National Building Society was placed under curatorship following excessive liquidity problems emanating from mismatches of asset and liabilities and misappropriation of deposits towards the purchase of personal properties by senior executives. The RBZ said indications were that the asset identification process by the curator could result in a substantial amount of the deposits being liquidated.