CABS, Zimbabwe’s largest mortgage lender, has re-introduced long-term mortgage lending, which had been suspended in 2008 when the country’s hyper-inflation eroded both interest income and loanable savings.
Kevin Terry, managing director for CABS, said the mortgages would initially be limited to low-cost housing development until the institution’s loan book expands.
“The funds are sourced entirely from customer deposits at present, although we are looking in the international markets for additional funds,” Terry said. “We are working on low-cost housing, which would deliver completed units in the way that we have done in the past.”
So far, the institution has disbursed $9,7 million in mortgage bonds.
The bonds have a tenure of up to 10 years, accruing interest at a rate of 15% per annum.
Eligible borrowers are required to pay 25% of their monthly gross income to service the loans.
Terry said the building society would expand the mortgage facility to medium and low-density housing, in line with the rate of growth in its loan book.
Like any other lender, CABS says its biggest hurdle is one – a low deposit base dominated by hot cash.
“This is why we are looking in the international markets for additional funds,” Terry said.
CABS hopes to ride on Zimbabwe’s adverse country risk with a strong credit rating, backed by its parent, Old Mutual Zimbabwe, the largest life assurance organisation in the country.
But this option would significantly increase the cost of funding and bid up interest rates beyond 15%.
CABS says it has also engaged various local authorities in the country and other stakeholders to establish a partnership for housing development.
Zimbabwe has endured a protracted mortgage stress that set in at the turn of the decade when savings started dropping steeply, aggravating over the years and eventually slumping in 2008, the country’s all-time bottom.