Housing Bank increased its interest rate from 3% to 3.75% and lowered the loan length to 20 years

Jo

Jo

Administrator
Master Penguin
The Housing Bank Just Screwed Home Shoppers in Lebanon

The two most popular options for home shoppers in Lebanon in order to finance their purchases is to either get a loan from the General Organization for Housing in case the apartment price is relatively low, or from the Housing Bank if the price is on the higher end.

However, earlier this month the Central Bank of Lebanon issued a new circular with amendments on subsidized loans, and as a result the Housing Bank increased its the interest rate from 3% to 3.75% while lowering the payment period from 30 to 20 years and toughening the lending terms in general.

To give you an idea of how these amendments impacted the monthly payments, a loan of $250,000 used to cost ~$1,050 on the previous conditions, but currently cost ~$1,500 based on the new terms and rate (refer to their loan calculator). Needless to say, this 30% increase means that a lot of home shoppers now can no longer afford the apartments they were previously aiming for!

I, for example, have been searching for an apartment in Beirut for a while now and the new terms mean that I have two options, to either settle for a significantly smaller one in space, or simply look for one of the same size outside the city. The latter is unfortunately a deal breaker for me so I just decided to halt everything now in hope for the prices to go down maybe… I guess it is only logical for this to happen now that the demand is expected to take a hit.

Things are by the way also quite ugly now for people who are already engaged by contracts with real estate developers. Those usually pay monthly installments directly to the developers until the project is fully complete, and then apply for a loan to finance the remaining amount, but they definitely didn’t see a 30% increase on their future payments coming! And while people like me can simply stop searching, others who are bound with contracts can do nothing but go for the loan anyway or pull out of the whole thing and pay a certain penalty to the developer for doing so.

I’m not an expert in economics but things seriously don’t seem right with the new Housing Bank decision, I mean you can’t simply cut down the people’s purchasing power just like that. I just hope this isn’t an indication of the Lebanese Lira being in a bad situation now and I also hope these amendments are only a temporary measure. Otherwise, I guess the real estate market is expected to go into stagnation no matter how developers try to convince the public that it is a resilient sector!

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  • Jo

    Jo

    Administrator
    Master Penguin
    What does this mean for the Lebanese economy? im confused. Will this lead to real estate owners/builders lowering their prices? Or is this a sign that there is no more Lira?

    @Dark Angel @Abou Sandal
     
    JB81

    JB81

    Legendary Member
    Isn't as an overall rule, when the interest rate goes up, it is to slow down the demand? It could be that the Housing Bank is in serious trouble as many of the current homeowners of the bank are not meeting their financial responsibilities. Thus, instead of having a bank collapse, there will be a slower demand on the bank in order to balance the red budget. Or, I hope it's a sign of an extra demand caused by a good economy... :rolleyes:
     
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    L

    LVV

    Well-Known Member
    Guys this is for high income mainly because there is speculation on the highest appartement
    This will not affect the General organization of housing specially for people outside Beirut
    Or most of the loans
     
    manifesto

    manifesto

    Well-Known Member
    Are you sure it's ISKEN we're talking about?

    Because the maximum loan account you can get with ISKEN is $180,000.

    I don't think the Housing Bank stands for ISKEN. It's a totally different institution.
     
    Dark Angel

    Dark Angel

    Legendary Member
    What does this mean for the Lebanese economy? im confused. Will this lead to real estate owners/builders lowering their prices? Or is this a sign that there is no more Lira?

    @Dark Angel @Abou Sandal
    they are redirecting the market it seems towards smaller apartment units, where the largest payment distribution will still fall in the affordable range with the same median if my assessment is correct, and would still be around 1000$ or even a bit less. additionally, and though the payments are a bit steeper, the ownership will be transferred faster and the borrower will incur less overall interests. the payment increase however is steep, and people might need to reconsider. another good outcome is that most people who still want to buy larger scale apartments will reconsider remote locations as potential candidates, thus on the medium run easing the pressure and the demand on beirut and the coastal areas. there is also a grace period, with a choice of 3 to 6 years. this should also count for something.

    still a problem for anyone who had different plans and was counting on the loan in its previous format..

    the terms and conditions can be found here

    btw, @Jo i am not getting any notifications for the mentions.
     
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    Dark Angel

    Dark Angel

    Legendary Member
    Are you sure it's ISKEN we're talking about?

    Because the maximum loan account you can get with ISKEN is $180,000.

    I don't think the Housing Bank stands for ISKEN. It's a totally different institution.
    the maximum amount now is 800,000,000LL it seems.
     
    manifesto

    manifesto

    Well-Known Member
    Whatever happened to Isken? Are they still not accepting applications?
    I'm planning to buy a house by the end of this year.

    (@Indie time to shop for a wedding dress)
     
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