Says the R1bn guarantee is a positive move in addressing local housing problems.
The Banking Association South Africa has come out strongly against some local media claims that providing access to housing loans for the local ‘gap' market will mirror United States banks ‘sub prime' lending criteria.
On the contrary, the Association says the R1 billion Government Guarantee Housing Fund announced by Tokyo Sexwale, Minister of Human Settlement, is a positive move in addressing local housing problems in SA without compromising on lending selection criteria.
According to Pierre Venter, GM for Human Settlement at the Banking Association, both lenders and the Minister of Human Settlements stressed that the new fund will assist SA citizens earning R 3500 rand a month to R 9 000 rand a month economic bracket to have improved levels of access to housing for the first time.
This bracket includes local teachers, police officers and nurses who up until now have not been eligible for the same housing subsidies extended to the poor or earning sufficiently high enough to be able to secure traditional housing loans and credit from banking institutions.
A sovereign guarantee fund will enable lenders to reduce the interest rate that they charge to such customers by about 0.5%, as it reduces the risk which lenders face in the event of default.
Moreover, both lenders and government alike acknowledge that over and above this, there is a need for collaborative work to be undertaken so as to reduce the overall cost of a housing unit if lenders are to make meaningful progress in deepening their market penetration within this gap market. It is envisaged that a joint technical task teams will engage over the next few months to explore cost reduction opportunities, says Venter.
"Lenders in SA have always lent prudently, hence we have never had a ‘sub-prime' market. Whilst consumers experienced severe financial hardship and are recovering from this economic devastation, there wasn't a bank crisis which required ‘bailouts' by government as was evidenced elsewhere in the world. Further, the introduction of the National Credit Act in 2007 prevents lenders from lending recklessly, therefore preventing irresponsible lending which we saw occur in the USA, this will definitely not be mirrored locally," says Venter.
The Banking Association also quoted from Minister Tokyo Sexwale's 2010 Parliamentary Budget speech to the National Assembly, "we emphasised to financial institutions that in putting the floor under their operations in this "gap market" to mitigate their risk, while also providing an opportunity to beneficiaries, financial prudency should remain paramount in accordance with regulatory requirements. In no way can there be recklessness in lending practices which may lead to flippant calls upon the Guarantee Fund."
A committee will also be set up with the banking sector and government and monitored by the Department of Human Settlement to ensure lending requirements are adhered to.
The Banking Association South Africa has come out strongly against some local media claims that providing access to housing loans for the local ‘gap' market will mirror United States banks ‘sub prime' lending criteria.
On the contrary, the Association says the R1 billion Government Guarantee Housing Fund announced by Tokyo Sexwale, Minister of Human Settlement, is a positive move in addressing local housing problems in SA without compromising on lending selection criteria.
According to Pierre Venter, GM for Human Settlement at the Banking Association, both lenders and the Minister of Human Settlements stressed that the new fund will assist SA citizens earning R 3500 rand a month to R 9 000 rand a month economic bracket to have improved levels of access to housing for the first time.
This bracket includes local teachers, police officers and nurses who up until now have not been eligible for the same housing subsidies extended to the poor or earning sufficiently high enough to be able to secure traditional housing loans and credit from banking institutions.
A sovereign guarantee fund will enable lenders to reduce the interest rate that they charge to such customers by about 0.5%, as it reduces the risk which lenders face in the event of default.
Moreover, both lenders and government alike acknowledge that over and above this, there is a need for collaborative work to be undertaken so as to reduce the overall cost of a housing unit if lenders are to make meaningful progress in deepening their market penetration within this gap market. It is envisaged that a joint technical task teams will engage over the next few months to explore cost reduction opportunities, says Venter.
"Lenders in SA have always lent prudently, hence we have never had a ‘sub-prime' market. Whilst consumers experienced severe financial hardship and are recovering from this economic devastation, there wasn't a bank crisis which required ‘bailouts' by government as was evidenced elsewhere in the world. Further, the introduction of the National Credit Act in 2007 prevents lenders from lending recklessly, therefore preventing irresponsible lending which we saw occur in the USA, this will definitely not be mirrored locally," says Venter.
The Banking Association also quoted from Minister Tokyo Sexwale's 2010 Parliamentary Budget speech to the National Assembly, "we emphasised to financial institutions that in putting the floor under their operations in this "gap market" to mitigate their risk, while also providing an opportunity to beneficiaries, financial prudency should remain paramount in accordance with regulatory requirements. In no way can there be recklessness in lending practices which may lead to flippant calls upon the Guarantee Fund."
A committee will also be set up with the banking sector and government and monitored by the Department of Human Settlement to ensure lending requirements are adhered to.
- Realestateweb
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