Saleh: new mortgage refinancing company to lower interest rates
CAIRO: Mortgage Finance Authority (MFA) Chairman Osama Saleh said preliminary 2006 end-of-year figures show the total mortgage lending volume has reached LE 1 billion. If confirmed, the figure would mark a 54 percent increase over the LE 650 million reported by MFA in September.
In a statement, Saleh credited increased awareness of the revised system with the rise in lending. In the past year, MFA launched widely visible print and broadcast media campaigns, and established a mortgage hotline and website, all largely aimed at low income individuals seeking to purchase their own homes.
Saleh said he expects the lending volume to reach LE 4 billion by the end of 2007 as more banks and other lending institutions enter the market and as the Egyptian Company for Mortgage Refinancing (ECMR) begins operations.
Also expected to contribute to a rise in mortgage financing are the Ministry of Investment’s plans to restrict lending activities by real estate developers, as is commonly practiced now, in order to allow banks to play a more active role. Minister of Investment Mahmoud Moheiddin said studies are now underway to draft a legislation outlawing lending by developers, but has not set a timetable for its finalization.
The launch of ECMR in H1 2007 is expected to help lower interest rates, one of the biggest obstacles facing borrowers under the current system, Saleh said. Lending rates in the 12-14 percent range have limited the participation of limited income groups targeted by MFA. In addition to high interest rates, the 2001 Mortgage Finance Law limits the maximum monthly payment of a low-income borrower to 25 percent of total monthly income. This, in turn limits the total amount that person can borrow.
Coldwell Banker Operations Manager Lena Fawzy said she expects interest rates will drop because of increasing demand and the government’s recognition of the importance of activating the sector to its economic development program.
We see the mortgage industry as the future of the country, says Fawzy. And there s a general sense that interest rates will go down in the near future as demand increases for mortgage finance.
Last year MOI pushed through legislation to reduce the property registration fee from 12 percent to 3 percent or a maximum of LE 2,000. MOI’s reform program for mortgage financing began in 2005 when Moheiddin vowed to activate the system which, up until June 2005, had produced just LE 15.8 million in total lending volume.