The benefits of housing loans … and the “coincidence” of April 1

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Yvonne Anwar Saibi wrote in “The Call of the Nation”:

Interest on the domestic debt was reduced, and the government achieved a savings of about 2.3% in servicing the debt, but this step may not be reflected on the people due to the banks’ continued application of circulars and laws to their liking, adopting the discretionary approach to it as many see.

In its circular intermediate circular No. 545, the Banque du Liban reduced the rate of interest imposed on housing loans granted before the date of its issuance, and gave the banks until March 31, as a maximum, to amend and become effective as of 04/01/2020. But despite the mandatory of this decision, it appears that a number of banks will not be obligated to implement or at least will try to circumvent the decision in some way.

Long-term loans, especially housing loans, can be paid in two ways that are not third: the first is to pay the principal, that is, its value before paying the interest, as is the case with General Housing Corporation loans, while the remaining loans mix the original with interest, and here it was not clear until the mechanical hour that will work Banks, according to them, to implement the circular. The benefits in Lebanon are mobile, that is, they are not fixed. Here, it is possible to justify, to some extent, the variation in the increase in the interest rates on housing loans, given the indicator that was adopted when signing the contract. There is no single index for this market, and interest rates vary according to the Banque du Liban index, the treasury bond index or the BRR Beirut interest rate.

But what cannot be justified is that some banks after the first circulation of the Banque du Liban on the reduction of interest and despite the dire living conditions and the wave of bankruptcies that affected a large number of companies with a “tsunami” lay off employees from their work, to inform their clients of increasing their monthly payments with an absolute mood for some return Banks at a later time to increase this payment a second time before informing the clients a few days ago of the decision to reduce interest so that the monthly payment returns as it was before the last increase

Uncirculated law

George, for example, was an employee who worked in public relations but due to the current economic conditions he was fired. He recounts what happened to him in connection with the “Call of the Nation” and says: “I received a text message from the bank I have been dealing with for nearly two months to inform me about the increase in the monthly payment of my housing loan by 100,000 pounds. So I called to ask about the reason to inform me the employee that the bank decided this increase and that accordingly the rescheduling took place without the need for my signature or permission from me and the bank is completely free to make a similar decision. I only had to tell her that I had become unemployed and that I would probably not be able to make my payments during this period. However, a few days ago, the employee contacted me again to inform me that the increase that had been decided would be deducted from 01/04/2020.

George added, “This is nothing but a monument, so that banks do not reduce interest rates according to the circular of Banque du Liban. Here it must be noted that I received the loan in 2016 and this means that I have the right to benefit from the circular. But the issue did not end there, as the same employee came back to me two days ago to inform me about the necessity of paying two bonds, so I replied that the budget law permits a period of grace for the defaulters for a period of 6 months, to be satisfied with answering that the banks were not notified of this decision, knowing that it was published in the official newspaper and thus became effective.

In turn, Rafik explains that “he has a housing loan from one of the largest banks and he is different from the loans provided by the General Housing Corporation. This loan is supported by the Bank of Lebanon and is at zero percent interest. The composition of this loan required the payment of the loan’s capital in a period of 15 years and then the interest payments. About a year ago, they called me from the bank to inform me of my monthly payment increase of 77 thousand pounds, meaning that the increase over a period of 26 years would be about 24 million pounds, knowing that the first period of the loan should not have been noticed any increase in interest. But the most dangerous thing is the banks ’failure to respect the budget law in terms of not respecting the clause regarding the grace period of 6 months as a result of new situations, even though this issue has been left to the bank and its customers to find a solution that takes into account the economic conditions of each individual separately. But what actually happened is the interpretation of circulars and laws by commercial banks as they like without accountability, supervision or whoever holds them accountable.

The circular saves 7 billion liras

On the subject, Roni Lahoud, Director General of the General Housing Corporation, said in an interview with “The Call of the Nation” that the circulation of the Banque du Liban is positive and covers all old loans and will be used by those who pay the interest on their loans to banks. This means that in regards to the subsidized loans granted by the General Housing Corporation, the value of the monthly bond may not be reduced except for people who repay the interest of their loans. As for those who are still in the stage of settling the principal’s debt, their payments will not be noticed any reduction and the value of their monthly dues will not change, since they are still in the first stage of paying the loan amount, according to which the basic capital is paid. However, they can take advantage of the Central Bank circular with the start of the second stage, according to which the value of their interest will be paid.

“The circulation of the Bank of Lebanon will inevitably lead to a reduction in the cost of interest paid by the General Housing Corporation to the banks monthly on behalf of borrowers at a rate that exceeds 7 billion Lebanese pounds per month,” Lahoud added. Consequently, the estimated liabilities of the Foundation will decrease from about 21 billion per month to approximately 14 billion Lebanese pounds.

The Lebanese “consumer” who is afflicted by one of the largest ratios of household indebtedness in the world has only the “promise of cumin”, that is, the cumin that promises to be irrigated. Thus the Lebanese remains, as usual, the “scapegoat ram”, which is affected by the rise in interest and does not benefit from its decline only because of the discretion and purchase of financial institutions operating in the local market.

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