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Wednesday, 28 December 2022

FRA eases borrowing limits on home loans

The FRA is easing credit limits for homebuyers: The Financial Regulatory Authority has loosened income requirements for mortgage lenders in a move designed to boost lending and help people purchase homes amid rising house prices. In a statement yesterday, the regulator said that it had raised the income / installment ratio to 50% from 35-40% previously, allowing borrowers to take on a greater amount of debt as a proportion of their income.

  • Homebuyers are now eligible for mortgages that will see them pay up to 50% of their monthly income in installments
  • The rules previously capped the monthly installments at 35% for low-income individuals and 40% for middle-income borrowers.

Why the change? The FRA said that the decision was taken in response to “various economic variables,” especially the soaring rate of inflation. The depreciation of the EGP against the greenback this year has sent urban inflation to five-year highs, which has also caused house prices to rise.

Uncertainty about state assistance for home loans: The move comes as the central bank stops subsidizing low-interest loans for homebuyers, and passes responsibility to the Housing Ministry as part of the recent loan agreement with the IMF. It is unclear whether the Housing Ministry will keep the two subsidized mortgage initiatives going in their current forms.

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