Company to offer primary lenders long-term financing at 9.5 percent
CAIRO: The launch of the Egyptian Company for Mortgage Refinance (ECMR) will help lower lending rates to 11 percent, Minister of Investment Mahmoud Moheiddin told the People’s Assembly Wednesday.
In a January statement, the Mortgage Finance Authority (MFA) announced that ECMR is due to begin operations in Q1 2007, although there has been no recent confirmation of this.
Although the mortgage sector grew to LE 1 billion in total lending by the end of 2006, it remains out of reach of middle and low-income groups for reasons that include high lending rates. Current rates stand in the 12 to 14 percent range.
Total lending stood at LE 650 million in September 2006 and just LE 16 million in July 2005.
Moheiddin said ECMR will provide banks and other landing institutions with long-term financing at 9.5 percent, helping these lenders offer mortgages at 11 percent. The minister added current interest rates remain high because of the high costs of lending and lack of competition in the market.
In February, the People’s Assembly Housing Committee approved a LE 214 million loan from the World Bank to be pumped into the country’s still infant mortgage financing industry. The loan comes with a 20-year repayment schedule, including a 6-year grace period. According to the Ministry of Finance, the government will make the funds available to primary lending institutions represented in the four established mortgage finance companies through ECMR.
In February, MFA Chairman Osama Saleh said his office is looking to license three more mortgage finance companies by the end of the year, bringing to seven the total number of specialized lending institutions.
Saleh’s announcement came days after an Egyptian-Gulf consortium began operations with an Islamic financing company, which holds LE 500 million in capital.
The consortium is led by the United Arab Emirates’ Amlak Finance.
Since mid-2005, MOI has worked to activate the mortgage financing sector by helping pass legislation to lower property registration fees from 12 percent to 3 percent or a maximum of LE 2,000, and another to lower property taxes from 46 percent to 10 percent. Still, more than 80 percent of properties remain unregistered and the issue of home financing remains a largely informal agreement between buyer and seller over a maximum of 7 years.