CB says 7% housing loan scheme neither for settling existing mortgages nor for realtors

The Central Bank said the newly introduced housing loan scheme at 7 percent cannot be utilised for settling existing housing loans and by commercial scale real estate developers. 

A scheme aimed at offering housing loans at 7 percent for State and private sector employees confirmed in their employment went into effect on December 10, giving life to a budget proposal made in November. 

The key objectives of the scheme were to support the expansion of home ownership of Sri Lankans and to provide an additional stimulus to the domestic construction sector and its supply chains. 

In an explanatory note issued last week on the scheme, the Central Bank said the scheme is neither for settling existing housing loans nor for commercial real estate developers. 

There was some expectation among the existing mortgage borrowers if the new scheme would enable them to re-finance their exiting home mortgage at 7 percent. 

However, such an arrangement is not covered under the order issued by the Monetary Board in early December putting the scheme into effect, but said that the banks should have passed down any rate benefits to those borrowers as the market lending rates had descended to record levels. 

“Considering the cost of funds, market interest rates and other relevant factors based on their internal policy and/or business decision, the respective bank may reduce the interest rate of an existing housing loan at their discretion,” the Central Bank said last week. 

Further, in responding to queries if the loans under the scheme have any minimum or maximum limit one could borrow, the Central Bank said there is no such cap but added that, “the amount will depend on the respective bank’s assessment/evaluation over the borrower’s income, repayment capacity, value of property offered as the primary mortgage and any other factors based on the bank’s internal policy and/or business decision.” 

Further, loans under this scheme can be applied as joint applications if both husband and wife are salaried employees and/or if only one is salaried and the other is not. The Central Bank said, “Such requests can be considered favourably, however, only at the discretion of the respective bank based on their internal policy and/or business decision”.