HomeBusinessBanks turn to mortgages to raise deposits

Banks turn to mortgages to raise deposits

Banks are stepping up efforts to provide home loans to the market to generate more interest income and mobilise deposits in a tight operating environment.

BY TATIRA ZWINOIRA

This comes as banks realign their lending portfolio which has been largely skewed towards consumption.

Cabs-Bank

The rise in the number of banks providing mortgages is due to the current economic constraints, namely meagre salaries, liquidity constraints, lack of lending from banks due to uncertain returns and high unemployment rate that have left little to none disposable income for individuals.

This also comes on the back of potential home-seekers being short-changed by co-operatives and land developers.

Mortgages act as a way to offer loans to the market after paying deposits and the balance of that being paid over-stipulated time while paying interest rates to the banks at an average of 8% to 16%. Average requirements for deposits to be paid are 40% of the asking price.

Recently, Stanbic Bank Zimbabwe introduced a home loan product to the market with a core focus to provide current and prospective customers with a full product basket which in turn creates convenience for them.

A representative of Stanbic Bank said customers would be required to pay 30% of the purchasing price as deposit while the other 70% balance would be paid over 20 years in installments.

The minimum purchase price of the intended property must be $20 000 while beneficiaries must be earning at least $550 per month, which figures must reflect in their accounts for at least three months. The minimum income also applies to those not formally employed but can show steady inflows of at least three months of the same amount.
As part of the requirements, prospective clients must bring title deeds.

“The title deeds will be for the property which the client intends to buy. Title deeds are required as proof that the seller owns the property which they are selling. During application, copy title deeds of the property and agreement of sale will be part of the documentary requirements. When the loan is approved, the title deeds will be transferred from the seller’s name into the name of our client, who is the buyer,” Stanbic Bank said.

“Our home loan is income based, for which salary is one type of income. Your monthly income will determine how much you qualify for and eventually the property that you will buy. Any current and prospective customer who meets our home loans conditions will qualify.”

Stanbic joins CBZ, CABS, FBC and ZB that have come up with home loans.

CBZ group executive of Marketing and Corporate Affairs Laura Gwatiringa said the bank planned to increase its housing delivery in the economy in line with the economic blueprint, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset).

“CBZ has always been in mortgage finance as Beverly Building Society, and today we are also poised to help fulfil the group’s strategic thrust to increase housing delivery in the economy in line with the ZimAsset national agenda,” Gwatiringa said.

“Our requirements are in line with the general mortgage lending requirements on the market. Primarily, an applicant is expected to raise a deposit of up to 40% of the purchase price, the property under purchase/construction should have a title deed that will be ceded to the bank and the applicant should demonstrate capacity to service the monthly instalment.

“On the issue of age, the cap is that the tenure of the mortgage loan should not go beyond the applicant’s retirement age. The tenure is currently at a maximum of 20 years. CBZ offers very competitive rates that range between 8% and 16% per annum.”

She said CBZ targeted mostly first-time homeowners, low income earners and individuals who were keen to benefit from low-cost housing schemes.

While mortgages constitute 15% of business for CBZ, it is the core business for CABS Bank as part of the Old Mutual Group.

CABS managing director Simon Hammond said mortgage lending was its core business as a building society.

“We are the largest mortgage lender in Zimbabwe and have significantly contributed to the urban housing development in the country. As market leaders, we set the pace and our terms and conditions are very competitive,” Hammond said.

“Our target market includes all Zimbabweans at home and in the diaspora who have regular monthly income wishing to purchase, build or improve a fixed property in the urban areas of Zimbabwe.

“We also offer mortgage solutions to corporates who need to purchase, improve or build properties for own use or for investment. CABS also appeals to property owners both individual and corporate who want to release equity out of their unencumbered properties through the provision of equity release loans.

He said customers were required to contribute 25% towards the purchase of their property while the Society would provide the remaining 75% as a mortgage loan. The loan tenure was determined by one’s age to retirement so that the loan was paid off before the borrower retired.

“Our maximum loan tenure is 20 years. Individual mortgage rates are 12% per annum for properties in the high-density areas and 15% per annum for properties in the medium to low-density areas. Loan repayments should not exceed 25% of the borrower’s gross monthly income to enable the customers to meet other living expenses while servicing their mortgage. Other costs include valuation fees of 1,5% and loan application fees of $100,” Hammond said.

As the market becomes more and more constrained, the need to provide housing at affordable cost has also risen. In the 2016 national budget, housing is projected to register a 4,2% growth next year.

The current national housing backlog stands at about 1,25 million units. Under the National Housing Delivery Programme (2014 – 2018), the target is to deliver 313 368 fully constructed housing units or serviced stands, with the beneficiary being the main contributor, and government providing land and bulk infrastructure services.

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