A government housing affordability scheme will let first time Caymanian homebuyers enter the housing market at preferential interest rates, with government guaranteeing up to 35 per cent of a mortgage up to $200,000.
Leader of Government Business Kurt Tibbetts told a Cabinet press briefing Thursday those that qualify for the scheme will be able to access mortgages at the variable prime mortgage rate plus one point, with up to 100 per cent financing.
The current prime mortgage rate is 7.75 per cent, but many new homeowners face paying the higher subprime rate, plus one to two points, when they buy their first house.
‘This programme is ideal for those who are new to the employment market,’ Mr. Tibbetts said. ‘It also gives a chance to those who have not yet accumulated the savings needed for a down payment under conventional means, to realise their dreams of obtaining a mortgage and owning their own home.’
The scheme was first announced at a People’s Progressive Movement National Council Meeting in April (Caymanian Compass, 23 April). At the time, Mr. Tibbetts said it would begin within two to three weeks.
The scheme – to be called the Government Guarantee Home Assisted Mortgage- will be administered through the National Housing and Development Trust in collaboration with seven banks.
The banks have pledged up to $5 million for the first year and will assess the success of the initiative after that time. Participating banks are Butterfiled Bank Cayman (Limited), Cayman National Bank, Fidelity Bank (Cayman) Ltd, First Caribbean International Bank, HSBC Financial Services, Royal Banks of Canada and Scotiabank and Trust (Cayman) Ltd.
Maxine Gibson, NHDT general manager, said the scheme would guarantee the deposit portion of the loan, up to 35 per cent of the total mortgage.
She confirmed the scheme is primarily geared toward those purchasing existing property, although the NHDT will consider applications from those wanting to build new houses on a case-by-case basis.
To qualify for the scheme, applicants will have to have a household income of less than $75,000.
‘The primary advantage is that it allows people to get into the home market at 100 per cent financing,’ said Mrs. Gibson.
‘It means [participants] … can get a home with no money down. In some cases they won’t have to put down a deposit because [the NHDT} are guaranteeing the deposit.’
Mr. Tibbetts said administrative costs for the scheme will be minimal as it will be administered by existing NHDT staff. ‘Whatever the amount is that the Government guarantees, the Government guarantee will fall away as soon as that amount is paid down on the principal. It is not anticipated that there will be any tremendous cost at all,’ he said.
Mr. Tibbetts said the Government will make provision in the budget for any contingent liabilities arising out of possible defaults, but it will not put in place charges or liens against houses purchased under the scheme.
The scheme will be formally launched on 9 November with a press release and the signing of an agreement with participating banks. An open house will follow the next day, allowing the public to come out and learn more about the scheme.