XN000022-1977-03-04 — Page 3

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FRIDAY, MARCH 4, 1977

ON THE SUBJECT OF MORTGAGE FINANCE, MR. HADDON-CAVE SAID THE WORKING PARTY HAD ENVISAGED THAT FUNDS WOULD BE PROVIDED MAINLY BY THE COMMERCIAL AND OTHER FINANCIAL INSTITUTIONS LENDING DIRECTLY TO THE GOVERNMENT'S NOMINATED FLAT BUYERS ON TERMS WHICH HAVE YET TO BE THE SUBJECT OF FORMAL NEGOTIATIONS WITH THE BANKING AND FINANCIAL COMMUNITY.

THE WORKING PARTY IS ALSO PLANNING FOR THE ESTABLISHMENT OF A MORTGAGE INSTITUTION, TO BE WHOLLY OWNED BY THE GOVERNMENT, TO RAISE FUNDS FOR ON-LENDING TO THE EXTENT NEEDED TO SUPPLEMENT THE COMMERCIAL BANKS FUNDS, BUT THIS INSTITUTION MAY NOT NEED TO BE BROUGHT INTO OPERATION AND, EVEN IF BROUGHT INTO OPERATION WILL NOT COMPETE WITH THE COMMERCIAL BANKS FOR FUNDS.

THE BASIC MORTGAGE TERMS WHICH THE WORKING PARTY HAD IN MIND WERE :-

* DOWN PAYMENT

* MATURITY

*

INTEREST

A MINIMUM OF $10,000 OR 10 PER CENT OF THE SALE PRICE, WHICHEVER IS THE HIGHER-

15 YEARS-

TO BE SET INITIALLY BETWEEN EIGHT AND NINE PER CENT A YEAR, FOR FIXED PERIODS OF THREE, FIVE OR SEVEN YEARS, SUBJECT TO PERIODIC REVIEW AND TO ANY ARRANGEMENTS WHICH WOULD MINIMISE THE RISK TO THE MORTGAGOR OF FLUCTUATIONS IN MONTHLY PAYMENTS.

REFERRING TO THE POSSIBLE SITUATION WHERE THE OPEN MARKET VALUES OF THESE FLATS WOULD BE CONSIDERABLY HIGHER THAN THE SALE PRICE, MR. HADDON-CAVE SAID THAT THE GOVERNMENT WOULD HAVE TO INTRODUCE CERTAIN RESTRICTIONS ON RESALE.

DETAILS HAD YET TO BE FINALISED, HE SAID, BUT WHAT THE WORKING PARTY HAD IN MIND WAS A FIVE YEAR TIME LIMIT WITHIN WHICH THE OWNER WISHING TO SELL HIS FLAT WOULD BE OBLIGED TO SELL IT TO THE HOUSING AUTHORITY AT THE PRICE HE ORIGINALLY PAID. IF THE AUTHORITY DOES NOT EXERCISE THE BUY-BACK OPTION THE OWNER WOULD BE FREE TO SELL THE FLAT ON THE OPEN MARKET.

AS REGARDS CONSTRUCTION, THE FINANCIAL SECRETARY SAID THAT THE HOME OWNERSHIP FUND HAD BEEN CREATED BY RESOLUTION OF THE LEGISLATIVE COUNCIL ON JANUARY 5, 1977. THE DRAFT ESTIMATES OF EXPENDITURE FOR 1977-78 PROVIDE FOR $102.5 MILLION TO BE TRANSFERRED FROM GENERAL REVENUE INTO THE FUND IN ORDER TO MEET EXPENDITURE IN THE FIRST YEAR OF THE FLATS-FOR-SALE CONSTRUCTION PROGRAMME. PROCEEDS FROM THE SALE OF THE FLATS WILL BE CREDITED TO THE FUND.

/THUS,