Central Bank of Egypt (CBE) amended the mortgage finance initiative, which was issued in February 2014 to finance the purchase of housing for earners with low and average incomes.
In a statement Thursday, CBE said it decided to amend some of the terms of the initiative. This is in light of the challenges this initiative has faced since its launch, especially as certain categories of low-income earners could not to benefit from it, either due their low income, or being unable to prove their eligibility.
According to CBE, the most important of these amendments is providing an opportunity for those who earn less than EGP 1,400 per month to benefit from the initiative at a discounted annual interest rate of 5% instead of 7%.
The interest rate cut will lessen the burden for low-income earners, the statement read
Amendments also included reducing the required down-payment for the price of the apartment by approximately EGP 12,000, in addition to the state providing greater support in order to achieve the desired social justice for the initiative and the social housing program.
CBE said it will encourage banks to fund groups who find it difficult to prove their income, by covering credit risk through group insurance policies.
Mortgage Finance Fund (MFF) determines income limits deserving support and funding within the initiative. It also determines the value of units that can be financed for those who earn less than EGP 1,400, so as to guarantee that support and funding would reach these categories.
According to CBE, mortgage finance has been made available to a new segment under the name of “privileged average income”, which aims to open the way for youth wishing to acquire housing through mortgage finance initiatives.
CBE statement explained that the rate of return for this funding will be higher than that of other groups benefiting from the initiative, as it will reach an annual discount rate of 10.5%, provided that the maximum monthly income does not exceed EGP 15,000 per person and EGP 20,000 per family. Another condition is that the maximum price of the financed unit for that category should not exceed EGP 950,000.
CBE pointed out that the introduction of this category in the initiative will contribute to encouraging real estate developers to build average housing, as well as encouraging banks to grant financing to middle-income homeowners.
CBE also explained that banks have not funded a large number of citizens from the middle-income group, due to supply shortages of units. The statement pointed out that this will be integrated with initiatives to be launched by the Ministry of Housing in order to encourage construction for middle-income groups.
Among the most important amendments introduced by CBE to the initiative, is considering the maintenance deposit as part of the funding for low-income earners, which is paid over the same period as the funding and for the same return as the initiative. Amendments also included exemption from repaying the value in the case of the borrower’s death.
This is in addition to opening up new marketing channels by involving mortgage companies directly in the initiative, through the Egyptian Mortgage Refinance Company (EMRC), to work side by side with the banks.
