MPs to dicuss 20% cut in housing loan interest to ease burden on borrowers

TDT | Manama

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Lawmakers will discuss on Tuesday cutting housing loan costs, with some borrowers paying up to BD30,000 in interest on a BD60,000 loan. The proposal seeks to trim rates on Eskan Bank loans by 20 per cent, aiming to ease the weight on borrowers caught in a market where home prices have surged.

The MPs supporting the plan say many borrowers end up paying back nearly double their original loan, stretching repayments over three decades.

Borrowing costs

With property prices at their highest, they argue that lowering borrowing costs is long overdue.

The plan calls on the Ministry of Housing and Urban Planning to work with Eskan Bank to reduce what borrowers owe in interest.

It has been tabled by MPs Iman Shuwaiter, First Deputy Speaker Abdulnabi Salman, Second Deputy Ahmed Qarata, Zainab AbdulAmeer, and Dr Mahdi Al Shuwaikh.

Profits

The MPs say the bank was set up to support low- and middle-income families, not to rake in profits.

“Eskan Bank was created to offer affordable housing loans, not to make money off people trying to put a roof over their heads,” said Shuwaiter. “Yet last year alone, it pulled in BD35.7 million in profit. The government should be helping people buy homes, not cashing in on them.”

The Public Utilities and Environment Committee reviewed the plan and has recommended its approval, saying the cut would take some strain off borrowers.

Interest

The Ministry of Housing and Urban Planning, however, says Eskan Bank doesn’t charge interest as such, but applies an ‘administrative fee’ of up to 3 per cent on a reducing balance.

It says loan repayments are already kept in check by capping them at 25 per cent of a borrower’s income, with anything left unpaid after the repayment period covered by state funds.

“The ministry remains committed to providing housing services that fit people’s needs,” it said in a written response. “Eskan Bank also gives borrowers a six-month grace period before their first payment is due, and allows instalments to be deferred for up to two years without extra charges.”

Hefty repayments

MPs backing the cut say that even with these measures, borrowers are still weighed down by hefty repayments.

“The Constitution makes it clear that the government has a duty to help people get housing,” said Shuwaiter. “The way things are now, people are being saddled with massive debt just to own a home. A 20 per cent reduction is a necessity.”