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Home Loan Interest Rate Reduced
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23 January 2012

Choice Home Loan clients of the Fiji Development Bank started the New Year on a positive note following a reduction in their home loan interest rate. The Board in its November (2011) meeting agreed to reduce the interest rates on residential (owner-occupier and investment property) loans with effect from 1 December, 2011.

The 1.5% reduction applies across the board for the variable interest rate home loans and impacts as follows:
 
1.      All Choice Home Loans (owner occupier) from 10.25% to 8.75%;
 
2.    Line of Credit (LOC – for owner occupier homes) from 12.50% to 11%; and
 
3.    Residential Investment Property loans from 10.75% to 9.25%.
 
To ease repayments and allow CHL clients with LOCs meet their financial obligations, the two loans will be merged and the interest rate adjusted accordingly. Additionally, the LOC and Investment loans will be reviewed individually with due consideration to any impact such changes would have on FNPF transfers and charges. 
 
“Since the global financial crises started in 2008, interest rates increased as a result of high cost of funds and tight liquidity and this affected a lot of our home loan clients with repayments increasing accordingly,” says FDB CEO Ratu Deve Toganivalu.
  
“The reduction in the interest rate will result in a reduction on the repayment and hopefully this will alleviate some of the hardships faced by many of our clients.”
 
In 1990, FDB introduced a home loan product in an effort to diversify its portfolio and assist the construction sector by providing an additional source for financing for housing. This portfolio grew steadily until 1996 when rising interest rates and stiff competition forced the Bank to reconsider this product as a viable revenue stream.
 
In 2004 the Bank re-entered the home loan market by offering the CHL product which allowed people to purchase a home for their family (owner-occupier) or purchase a home/flats as an investment property (for rental). Included in this product also was an LOC, an extension to the home loan facility which allowed the borrower to take a personal loan.

In January 2008, a directive from the Minister of Finance saw the lending focus of the Bank change to what is now described as the Focused and the Non-Focused Sector. Lending to home buyers was suspended accordingly with no new lending for potential home buyers. The last interest adjustment was made in 2007.

As at 31 December, 2011, FDB had 702 accounts valued at $38.12MM in its home loan portfolio. Meanwhile, the Bank is reviewing this market segment with the view to reinstating this product.
 

 

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