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Home ownership now a mirage

Eric Chiriga

CENTRAL African Building Society (Cabs) has hiked its mortgage interest rates, making the hope of owning a house a pipe-dream for many.

tica, sans-serif”>The increase means that the cost of borrowing mortgage loans has become unaffordable for desperate home-seekers.

Property analysts say the increase in mortgage lending rates is further dampening home-seekers’ hopes of buying houses through mortgages.

Cabs increased mortgage lending rates for industrial and commercial properties from 130 to 220%, from 70 to 100% for new developments in the low-density areas and from 100 to 150% for existing residential dwellings.

Mortgage rates for developments in the high-density areas were increased from 35 to 50% while rates for business secured by housing were increased from 130 to 220%.

Managing director, Kevin Terry, said the latest rates were with immediate effect for new loans but will be applicable on existing loans from November 1. Cabs does not give mortgage loans to people earning monthly salaries of less than $7 million. With a monthly salary of $7 million, a person qualifies for a $20 million mortgage loan.

While houses now cost an average of $10 billion in the low-density, and $1,5 billion in the high-density suburbs, mortgage lenders are giving loans of only $20 million at an interest rate of more than 60% per annum for someone who earns a salary of $5 million per month.

In the building society’s financial results for the year ended June 30, Leonard Tsumba, the chairman, said a total of $267 billion in mortgage loans were advanced during the year, an increase of 589% from the previous year’s figure of $39 billion. He said that of the funds granted, $167 billion was advanced on the security of residential properties while $100 billion was secured by commercial banks and industrial properties.

Tsumba said that contrary to claims by the Reserve Bank of Zimbabwe governor Gideon Gono that funds released from statutory reserves had been abused, they were facing problems with affordability and availability of serviced stands with title deeds.

Gono had reduced statutory reserves of deposits not supporting mortgages to 30 from 35% in a bid to make more funds available for mortgage lending, but he later changed tack, accusing the mortgage lenders of putting the funds on the money market instead of housing projects.

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