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Johannesburg - It might be slick PR or altruism, but South Africa's largest retail bank, Absa, is allowing HIV-positive clients to skip mortgage payments if they are taken ill.
According to Absa, it has sourced insurance to cover mortgage instalments for lower-income customers unable to work due to Aids-related diseases as part of its 110% MyHome home loan offering.
The product will now also be available to households earning less than R15 142 per month, up from R11 000.
According to Luthando Vutula, managing executive of Absa Home Loans, the offering is made in partnership with external parties. "Mortgage payments will be covered [by insurance] until you get better," said Vutula.
HIV/Aids voluntary counselling, testing and treatment programmes as well as borrower education will be provided by the banks' external partners. Vutula declined to name the partners in the endeavour.
Absa said it has intensified its focus on the affordable housing market. Taking into account that no more than 30% of a household's monthly income may be spent on a bond, as per national credit regulations, a household earning R15 142 per month would be able to afford a house worth up to R450 000 if no deposit is paid.
"Pricing would have to take into account that your customers can't pay a deposit and are more risky," said Tracy Brodziak, an analyst for Old Mutual Investment Group South Africa. The interest customers will have to pay could be much higher than normal, she said.
However, Vutula insisted clients would not be burdened with higher interest charges.
"For these things to be covered, other institutions, some international, have to be part and parcel of this," he said.
Although 100% home loans have been on offer, stricter lending criteria by banks meant approvals have been much lower than in the past.
However, these criteria do not prevent customers from obtaining homeloans, said Vutula. "If you can afford it, there's absolutely no way you can't get it," he said.
The Absa product covers bond costs (about 4% of the total purchase price). Borrowers also do not have to pay a deposit.
- Fin24.com