Banks speak out on new regulation

If you are to buy this house from National Housing and Construction Company Ltd through mortgage financing, you might end up paying more because of the increased lending rate, which has also affected the mortgage rates. Photo by Rachel Mabala

What you need to know:

  • On average, a decent home costs between Shs50m and Shs150m. A mortgage of Shs30m, is a good boost for a saver because this will be the down payment allowing him to access up to Shs150m.

The banking sector says it is yet to study the Assignment of Retirement Benefits for Mortgages and Loans regulations before they can start giving out mortgages to eligible members of saving schemes.

Most banks Daily Monitor spoke to yesterday said they need to study the new regulations before they can embark on lending to members.

“We have just received the regulations and haven’t studied them to know what is expected of us. But the borrower should have the capacity for the contract cash flows to support the repayment,” a source within Housing Finance Bank that preferred anonymity told this newspaper.

However, Mr Micheal Mugabi, the bank’s managing director, described it as an exciting development because it is allowing the public leverage on their savings to meet the housing and shelter requirements.

He said previously, many individuals were left out because they lacked collateral to support their eligibility for mortgages.

“On average, a decent home costs between Shs50m and Shs150m. A mortgage of Shs30m, is a good boost for a saver because this will be the down payment allowing him to access up to Shs150m,” he said.

Ms Judy Rugasira, the managing director of Knight Frank, a property management firm, said previously, a person getting a mortgage had to deposit a sum of between 15 percent and 30 percent while the bank paid the remaining 70 percent to buy land or construct a house.

“If it is for buying land, that means the bank will top up 70 percent on price of the land and if it is to complete the building, the bank will top up 70 percent of the amount,” she said. 

Ms Rugasira added that the home ownership loans countrywide stand between 10,000 and 15,000 and are steadily growing.

Ms Annet Nakawunde, the managing director of Finance Trust Bank, said they need to come up with a product after they have understood the new regulations.

Mr Andrew Kabeera, the managing director of Post Bank, described the new rules as a good development but declined to comment further, saying the bank will come up with a formal position after they have studied them.