HFC concession to cost government R56 million |02 September 2020

Mr Palmyre (Photo: Anel Robert)

By Elsie Pointe

The government expects to shell out an estimated total of R56 million – around R3.5 million per month – between September 2020 and December 2021 as part of its 25 percent concession scheme to Housing Finance Company customers.

It was on Monday when the executive branch of the government announced that, as from September 2020, Housing Finance Company (HFC) customers will only have to pay 75% of their housing loans with HFC while the government will cover the other 25%.

Much like the Financial Assistance for Job Retention programme (FA4JR), the 16-month loan repayment support for HFC is one of the various mechanisms put in place to mitigate the impacts of Covid-19. A similar 25% concession will be made available to clients of another government entity, the Property Management Company (PMC).

“HFC will not be adversely affected because the government will be refunding the 25% concession on the repayment of loan back to the HFC. The HFC will still collect the same amount of money each month,” explained the chief executive of HFC, Ronny Palmyre.

“We were consulted before this decision was taken and we agreed on the formula, how to go about doing it, and since it will have been unsustainable for HFC to give out a discount of 25% on the loan, the government accepted to refund HFC the 25%,” Mr Palmyre explained.

HFC notes around 4,889 active accounts for loan repayments and at present collects some R14 million monthly from these customers.

However, customers with outstanding loan payments will not benefit from the concession until they clear the arrears.

The percentage of performing loans at HFC stands at a satisfactory 95% while non-performing loans are at 5%.

Meanwhile, new HFC customers who decide to take a loan from HFC during this 16-month period will also be assisted with the government support.

But given that most loan payments to HFC are deducted straight from a person’s salary or through standing order bank transfers, the HFC and finance ministry have come up with a mechanism to facilitate this assistance.

Instead of having all the 4,889 clients amend their payment plans, the clients will pay their loans in full as usual while the HFC refunds them their 25%.

For instance, a person owing R4,000 will see the same deducted from their paycheck or bank account but will receive R1,000 back in their bank accounts soon after.

“We have agreed with the finance ministry that each month it will have to transfer the money we are claiming from the government, and we will transfer these into the savings account of our customers […]we want to ensure that the refund enters into their bank account by the 1st or 2nd of each month so that it does not disrupt their budget,” said Mr Palmyre.

Mr Palmyre observed that there have been some concerns from HFC customers in regards to loan repayments ever since the pandemic outbreak but added that most have been making consistent payments.

However, HFC had been providing grace periods to some of its customers, particularly those linked with the tourism industry.

“In cases whereby a customer’s payment capacity becomes extremely low, the 25% will not be suffice for them and in that instance they might have to undertake further negotiations with the HFC.”

HFC offers housing loans for first time owners, second housing loans and home improvement loans at rates varying from 7% for loans less than R500,000 to 8% for loans above R500,000 and 10% on unsecured home improvements loans.