Cabs hikes mortgage bond rates


Ngoni Chanakira

THE Central Africa Building Society (Cabs) is increasing its mortgage bond lending rates with effect from December 1, further dampening the hopes of cash-strapped home-se

ekers.


The move comes as commercial banks have begun hiking their minimum lending rates (MLR) to levels way above the 100% mark.


A wave of increases in the MLR seems to be the order of day with several banks increasing theirs this week. Trust Bank Ltd published their increase which now sits at 163%, while First Bank has theirs at 169%.


Cabs managing director David Stephenson, said with effect from December 1, mortgage lending interest rates would be hiked.


He said all loans worth $100 million would shoot up by 20% from 65% to 85%.


The managing director said working capital for individual, industrial and commercial property loans would increase from 53% to 65%.


Schools, on the other hand, would have their interest rates increased by 6%, from 47% to 53%, while vacant land would attract an interest of 65%, up from the current 53%.


Stephensen said non-owner occupied residential properties and sole properties as well as non-trading companies and trust residential properties would attract an interest rate of 53% up from 45%.


He said owner-occupied low and high-density properties worth $20 million would now pay an interest rate of 50%, up from the 43% currently charged.


The managing director said owner occupied low and high density properties worth $20 million as well as owner occupied high density properties worth more than $100 000 but less than $20 million would attract an interest of 45%.


They were paying interest rates of 40%.


Analysts said other building societies would immediately follow suit due to Zimbabwe’s hyperinflationary environment.


They said it was however unfortunate because potential house owners would be forced to fork out more money at a time when everything else has begun to skyrocket.


Inflation has steadily risen from about 100% in January this year to 455,6% in September.


Meanwhile Cabs says it advanced by way of new mortgage loans a total of $9,7 billion, an increase of 117,3% over the previous financial year.

The building society said this is a new record in mortgage lending.


Cabs chairman Enos Chiura said applications from 1 083 borrowers were processed of which 234 were in respect of loans on properties in high density areas and 849 for purchase and building both low density residential and commercial properties.


“The acute shortage of affordable housing continues to be a problem and the increased costs together with the shortage of building materials further reduced the delivery of new housing units, particularly in high to medium density areas where serviced stands with individual title are a scarcity,”

Chiura said in his annual report for the period ended June 30.


Cabs increased mortgage rates on two occasions during the year in an attempt to offset the escalating costs of operation that it had experienced.


“However, these rates are still extremely negative to inflation and very attractive to borrowers in the market in general,” Chiura said. “Funds generated from investing activities continued to be utilised to subsidise mortgage lending rates in an attempt to keep these at affordable levels.”


The chairman said 957 loans were advanced for the acquisition of existing residential properties while 66 loans were advanced for the erection of or improvement to existing dwellings.


“A further 60 loans were advanced for commercial and industrial purchases and development,” Chiura said.


Overall, the Society’s mortgage advances grew at $14,7 billion or 45,9% of the industry total of $32 billion as at June 30.


Chiura said inflation continued to drive the value of properties upwards resulting in a significant decline in the loan to value ratio of properties mortgaged.


This, in turn, had a positive effect on loan servicing by borrowers with only 5,3% of loans being in arrears at year-end.


“The Society still has only six repossessed properties in possession with a total capital balance of $7,5 million,” Chiura said.


He said the lack of serviced stands with freehold title continued to restrict the delivery of new housing units and this, together with an unrealistically low income ceiling for those qualifying to borrow funds through the United States Agency for International Development Public/Private Sector Housing Programme, limited the number of loans granted.