NewsWhore
09-20-2007, 06:30 PM
Financial analyst Alejandro Fernandez warns anyone taking on a Dominican mortgage that at any given time mortgage rates could go from the present low of 11% to 18%, in a contribution to Clave newspaper today. He said that if this happens, mortgage payments could increase by 43%. He encourages borrowers to bear this in mind. This would not be the first time that interest rates soar. In 1986-87 interest rates were at 12%, but by 1989 they had quadrupled, causing many to lose their investments in real estate.
Fernandez makes the warning in the context of the extraordinary boom in mortgages in the DR. He criticizes the fact that a government development bank is offering an innovative product to young borrowers. It is being offered for a variable rate of 10.95%, and is available to homebuyers under 30 years old, with a generous financing span whereby borrowers only pay interest on the first part of the loan. Fernandez comments that this smells like the sub-prime mortgages being offered in the US.
He also warns that when market conditions change, consumers could lose their homes if they are not be able to afford the new much higher payment levels.
Fernandez says there have been 30 months of sustained triple digit growth in mortgage lending. Bank mortgages in the first six months of 2007 alone are up by 47%. He mentions that a Central Bank preliminary report points to a 79.4% increase. Meanwhile, commercial loans are only up 7%.
"The perverse and distorting incentives need to be revised," he warns. "The illusion of the present interest rates will not be able to be sustained over time. Consumers need to educate themselves and ponder their decisions. This to avoid tears of a possible hell," he predicts.
More... (http://www.dr1.com/index.html#8)
Fernandez makes the warning in the context of the extraordinary boom in mortgages in the DR. He criticizes the fact that a government development bank is offering an innovative product to young borrowers. It is being offered for a variable rate of 10.95%, and is available to homebuyers under 30 years old, with a generous financing span whereby borrowers only pay interest on the first part of the loan. Fernandez comments that this smells like the sub-prime mortgages being offered in the US.
He also warns that when market conditions change, consumers could lose their homes if they are not be able to afford the new much higher payment levels.
Fernandez says there have been 30 months of sustained triple digit growth in mortgage lending. Bank mortgages in the first six months of 2007 alone are up by 47%. He mentions that a Central Bank preliminary report points to a 79.4% increase. Meanwhile, commercial loans are only up 7%.
"The perverse and distorting incentives need to be revised," he warns. "The illusion of the present interest rates will not be able to be sustained over time. Consumers need to educate themselves and ponder their decisions. This to avoid tears of a possible hell," he predicts.
More... (http://www.dr1.com/index.html#8)