HE government yesterday announced a three percentage point chop — from 12 per cent to nine per cent — in mortgage rates charged by the National Housing Trust (NHT) to its richest customers.

At the same time, the NHT has raised the income band, to a maximum $2,000 a week, from the previous $1,500, for people who qualify for its lowest rate of two per cent.

The trust’s new interest rates structure, which will come into effect on May 1, was unveiled simultaneously by Prime Minister P J Patterson, during his contribution to the budget debate in Parliament, and in a statement by the NHT. Borrowers who received their mortgages since the start of this year, and would now fall within the two per cent category, will have rates rolled back to two per cent, the NHT said.

“Of a total 54,882 of the NHT’s mortgage accounts, 44,585 or 81 per cent will be benefit from reduced interest rates,” it added.

The NHT is a compulsory scheme under which employees have to contribute two per cent of their salaries to a mortgage fund as a no-interest loan. The employees’ contribution is matched by a three per cent levy on the wage bills of employers.

The agency, launched in the mid-1970s, develops and markets its owns schemes, provides mortgages for open market purchases as well as funds independent developers. An individual can borrow up to $800,000 from the NHT, but up to three persons can combine to borrow a maximum $2.4 million.

The NHT’s rates, which are substantially lower than those on the private mortgage market, were previously adjusted in June 1999, when its highest rate was lowered by two percentage points, from 14 per cent to 12 per cent.

Additionally, the income level to qualify for the two per cent mortgage was raised to $1,500 against $1,100.

The band for those who could borrow at the trust’s next lowest rate of four per cent was set at between $1,501 and $4,500, where previously only people who earned a maximum of $2,000 a week could borrow at this rate.

With yesterday’s changes, the maximum wage for the four per cent mortgage will remain at $4,500. However, the starting point is $2,000, up from $1,500, allowing people with higher incomes to access the lower rate.

Additionally, the government nipped a percentage point — from eight to seven per cent — the rate from people who earn between $4,501 and $9,000 weekly.

Those who earned above that band would previously have to pay 12 per cent for their NHT mortgages, but now borrowers will pay at nine per cent.

The NHT stressed that the rate reduction will lead to substantial savings for borrowers.

For example, on a 30-year loan of $800,000 someone who borrowed at 12 per cent would pay $9,355 monthly. At nine per cent the saving is $1,881 a month or $22,572 a year.

In the case where the rate has moved from eight to seven per cent, the NHT said that the saving will be $575 a month, or just under $7,000 a year.

“The reduction will result in tangible savings for thousands of mortgagors,” the NHT said.

In his Parliamentary remarks, Patterson claimed that the NHT was “in a state of shambles” when the governing People’s National Party (PNP) was returned to office in 1989, but had since been resuscitated and had performed.

“In terms of providing mortgages, for the period between 1982 and 1988, a mere 17,191 persons benefited at a total value of $819.7 million,” he said. “This cannot compare with the 49,620 who benefited at a total of $26.3 billion over a similar seven-year period — 1995-2001.”

In the current fiscal year, he said, the NHT projected to spend $6.06 billion providing 2,085 completions in scheme units; 1,212 in arrangements where individuals built on their own land or got mortgages for home improvement; and another 1,041 under interim finance schemes.

“The National Housing Trust, under my clear guidance and instructions, has embarked on a policy to make home ownership more affordable to the majority of its contributors, starting in 1995 with the introduction of mortgage interest rates of two per cent and four per cent,” the prime minister said.

In addition to lower rates to contributors, Patterson reminded, the agency had recently cut the interim financing costs to developers from schemes selling at under $1 million, from 12 per cent to eight per cent. On all other schemes the interest on interim finance was moved from 20 per cent to 12 per cent.

“These two significant reductions have had the effect of not only reducing the finance price of a unit to the purchaser but also encouraging private developers to invest in housing through the existence of lower financing charges,” he said.

The new NHT interest rates

* For those earning less than $2,000 per week, up from $1,500 per week, the interest rate will be two per cent per annum

* For those in the income band $2,000 – $4,500 per week, the interest rate will be four per cent per annum.

* For those between $4,501 and $9,000 per week, the new interest rate will be seven per cent per annum.

* For those earning $9,000 and above per week the rate will move from 12 per cent per annum to nine per cent per annum — a decrease of 25 per cent in the interest rate.