Absa Launches New Home Loan Product

March 19 - Absa said this week that it was stepping out with a new product that will make home loans of 110% available to South African households earning up to R15,142.

Over one thousand applications are expected to flood in to the bank in the next month, as medium income earners - usually those in the public service - seek out the new non-deposit loans.

"The people we're targeting here are teachers, civil servants, nurses and blue collar workers," said Luthando Vutula, the Managing Executive of Absa Home Loans.

Vutula confirmed that the new product was only the beginning of a policy that will see Absa roll out 110% home loans across all household levels, including the higher income market.

Last year, Absa started the ball rolling by introducing a product for households earning up to R11,000 a month.

The new loans were made possible thanks to a partnership deal signed with Agence Francaise de Developpement. Essentially, the French bank takes out 20% of the loans provided, thus reducing Absa's exposure to risk significantly.

Before being granted the loan, potential homeowners will attend an 'education scheme', to reduce the chances of defaulting on mortgage payments.

When questioned about the risks involved in providing loans to low income households that may tend to default on their monthly payments, Vutula noted that South Africa could not be compared to the situation in America.

"This is far from subprime," he said. "The problem in America was that people with no work were given loans. We will not be lending to people who cannot afford it."

Related Insurance Articles:
* Property Market on the Way to Recovery
* Bad Loans Mar Standard Bank Profits
* Utility Price Hikes to Affect Homeowners
* Housing Backlog Addressed

3/19/2010 11:56:50 AM