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Tuesday, 13 July 2021

Subsidized 30-year mortgages are now a thing for low- and middle-income earners

The Central Bank of Egypt (CBE) launched today an EGP 100 bn mortgage finance initiative for low- and middle-income earners, offering 30-year finance at a subsidized rate of 3% to qualifying borrowers, according to a CBE statement (pdf).

The program will only finance fully-finished homes, and so isn’t designed to support off-plan construction (the form that currently dominates the new-build market). Only homes that are included in the national real estate registry are eligible for finance under the program, and buyers will only be able to apply for finance for their primary residence. There is one loophole, though: Borrowers may be able to obtain finance for an unregistered home if they can pledge collateral worth as much as the home they want to buy.

THE FINE PRINT- You’re considered a low-income borrower if your monthly take home is less than 4.5k (EGP 6k per household). Borrowers in this bracket will be required to pay a 10% down payment and can access finance for homes worth up to EGP 350k. Middle income borrowers are defined as folks with monthly net salaries of no more than EGP 10k for individuals (EGP 14k per household). Middle class borrowers will need to cough up a down payment of at least 15% for homes worth up to EGP 1.1 mn and 20% for homes valued at EGP 1.1 mn to EGP 1.4 mn.

The program has generous eligibility requirements — it’s open not just to people with full-time jobs, but also to folks who are self-employed, including craftsmen. Pensioners are also eligible, provided they make a 40% down payment, and that they would be under 75 years old when the finance period concludes.

YOU CAN DIVE DEEPER with additional detail on the initiative in this CBE circular here (pdf)

Background: The new program, which was announced in March, comes after the CBE had launched last year its EGP 50 bn mortgage finance program for middle-income housing, which was a continuation of a previous initiative that ran from 2014 until January 2019. Under the previous initiative, those earning up to 40k a month were eligible for a preferential interest rate of 10% on their mortgages.

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