A scheme in which government would guarantee up to 35 per cent of a mortgage loan for Caymanians is set to begin in the next two to three weeks.
Leader of Government Business Kurt Tibbetts told attendees of the People’s Progressive Movement National Council Meeting last Thursday night about the scheme in response to a comment from the audience that suggested the government had ‘turned a blind eye’ to young Caymanians who could not afford to buy homes.
Speaking after the Cabinet press briefing on Friday, Mr. Tibbetts said it was important to the country that young Caymanians be able to buy homes.
‘Historically, for any society to really be stable, families have to be in a stable environment,’ he said, adding that home ownership by Caymanian families gives them a sense of progress in their lives.
Mr. Tibbetts also agreed that home ownership also makes citizens feel a part of the Cayman success story.
Maxine Gibson, general manager at the National Housing Development Trust said the loan scheme would guarantee the portion of a loan that would normally be the down payment. That portion could be up to 35 per cent of the loan amount.
Prospective borrowers have to qualify for a loan from one of the participating banks.
‘They still have to qualify just as they do with another other mortgage,’ said Ms Gibson.
Potential borrowers would have to be employed for at least six months prior to applying for the loan.
Ms Gibson said the loans are only for purchasing existing properties and would not be for constructing a house.
Two banks – Royal Bank of Canada and First Caribbean Bank – are already on board with the scheme, and Fidelity Bank has agreed to participate as well, Ms Gibson said.
However, Mr. Tibbetts said one bank had refused to participate, something which he’d like to see changed.
‘The entire country, not just the government has an obligation to make sure that [the mortgage scheme] happens,’ he said. ‘That includes the financial institutions that would be the facilitators.’
Mr. Tibbetts said he was disappointed that one of the commercial banks had refused to facilitate the loans.
‘I believe all the financial institutions that operate in the Cayman Island who do mortgage lending are in an environment that is very conducive for their success,’ he said. ‘Participating in this programme doesn’t cost them anything; they’re only facilitating a programme the government wishes to extend to the citizens who need this to be facilitated.’
Prospective borrowers under the scheme would first visit one of the participating banks and qualify for the loan. Based on factors such as income and fixed expenses, the bank would determine the maximum a person qualified to borrow.
One thing the government has been unable to negotiate favourably is the interest rate on the loan, which Ms Gibson said would be three per cent over prime.
‘The banks wouldn’t give a preferential rate because it’s a little higher risk,’ she said.
People who have borrowed money without having made the investment of a down payment are statistically more likely to default on a loan.
‘Whenever you have a higher risk loan, you can’t get a preferential rate,’ said Ms Gibson.