New Stimulus: $35 Million for First Time Home Owners Print E-mail
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Written by Shane D. Williams   
Thursday, 08 November 2012 00:00

PM Business forumThe Prime Minister of Belize has earmarked an initial $3.5 million to assist aspiring home owners. The initiative is Government’s latest effort to galvanize an economy made stagnant by local financial institution’s inability to attract clients. According to the Hon. Dean O. Barrow, “There is currently $131 million in excess liquidity in the banking system.” That is $131 million that could have been invested in education, entrepreneurship, small business expansion, home improvement and social development. Instead, it is locked up in vaults somewhere. Government’s first- time home owner’s program could see $35 million of that $131 million invested in new home construction.

When an individual visits the bank for a mortgage loan, in addition to signing over an asset as collateral, they are required to put up 10% of the principal in order to qualify for the loan. For a bungalow concrete structure, that 10% would be anywhere from $6,500 to $10,000. The people looking to buy their first home are those, who are currently paying rent, or young adults who are finally ready to branch out on their own. These people do not have $10,000 lying around. So, the idea of buying their own home in Belize was farfetched. Home ownership is a benchmark for social independence and financial stability. In simpler terms, a country is stronger when there is a huge population of homeowners. Because of that fact, the Government of Belize will now cover the 10% required by banks for loans of up to $100,000 in the form of a public guarantee. For the common man,this means they will no longer be turned down by the bank because they don’t have money to front. Government will make the initial investment on their behalf. Prime Minister Barrow said, “This would assist a minimum of 350 borrowers with their equity part of the total equation, which would in turn represent an aggregate sum of $35 million in new housing construction.”

From the initial $35 million in investment that will result from Government’s initiative, the banks will make millions in interest on the loans; construction supply companies will benefit tremendously through sales; contractors will be hired; hundreds of construction jobs will be created and at least 350 people will own their first home. The $3.5 million initiative would not have been as effective if it was Government’s only effort to stimulate the housing industry. That is because, while the 10% down payment has been a huge deterrent to potential borrowers, it has never been the main issue of concern. The main issue of concern has been the ridiculous interest rates charged by lending institutions in Belize. Government’s first priority was to get banks to lower their lending rate. That effort has been successful and though lending rates are not where government wants it to be, it is still at a historic low of 12.23% on average. Of course, Government will continue the fight to lower this rate. The DFC is a player in the first time home owners’ loan guarantee program and could be used as an organ to drive down mortgage rates. Nonetheless, as rates stand today, it is now easier for Belizeans to barrow and also less expensive than ever before.