The sub­sidised mort­gage pro­gramme for cit­i­zens earn­ing $8,000 or less an­nounced by Prime Min­is­ter Kam­la Per­sad-Bisses­sar at a po­lit­i­cal meet­ing on April 8 is not a new ini­tia­tive.

At the meet­ing, the Prime Min­is­ter said any­one earn­ing less than $8,000 a month would be able to buy a State-con­struct­ed house for up to $450,000 with ze­ro down­pay­ment and a two per cent in­ter­est rate.

"It means that every in­di­vid­ual who has a dream of own­ing a home for their fam­i­ly can now have their dream re­alised. This Gov­ern­ment is work­ing to put those dreams with­in your grasp...My gov­ern­ment is here to help make your dreams a re­al­i­ty," said Per­sad-Bisses­sar.

The pro­gramme of mak­ing low-in­come peo­ple's dreams of own­ing their own home a re­al­i­ty has been in place since 2007. The T&T Mort­gage Fi­nance (TTMF), which is the gov­ern­ment's im­ple­ment­ing agency for the pro­gramme, has been al­lo­cat­ed $200 mil­lion to fund the sub­sidy for these sub-prime mort­gages.

Of the $200 mil­lion al­lo­cat­ed for the pro­gramme, some $72 mil­lion has al­ready been dis­bursed to sub­sidise 1,100 ap­pli­cants, T&T Mort­gage Fi­nance (TTMF) of­fi­cials said. The sub­sidy is grant­ed to el­i­gi­ble ap­pli­cants–who must meet the es­tab­lished cri­te­ria of af­ford­abil­i­ty and cred­it sus­tain­abil­i­ty–for HDC and THA hous­es and Ca­roni lands.

That means that the ef­fec­tive mort­gage sub­sidy for each ap­pli­cant is $65,454, the of­fi­cials con­firmed.

In ef­fect, when the pro­gramme was es­tab­lished it as­sured the ap­pli­cant of a mort­gage sub­sidy for five years, at the end of which the ap­pli­cant would have been re­viewed to de­ter­mine whether they can af­ford to pay the mar­ket in­ter­est rates charged by ap­proved mort­gage com­pa­nies.

The two per cent in­ter­est rate is based on a 25-year mort­gage.

A TTMF of­fi­cial said: "Un­der the ex­ist­ing pro­gramme, the ac­count is re­viewed every five years to as­sess the mort­gagor's cir­cum­stances, with a view to re­vis­ing the rate to that that would ap­ply to a reg­u­lar ap­proved com­pa­ny mort­gage (which is cur­rent­ly five-sev­en per cent, de­pen­dant on the val­ue of the prop­er­ty).

"This is al­so be­ing ex­am­ined in light of the re­quired hike in in­stal­ment if the rate ad­just­ment were to take ef­fect."

As the mort­gage sub­sidy is now in its sixth year, the re­view process is un­der­way.

The TTMF of­fi­cial said: "Recog­nis­ing the pos­si­ble im­pact of the in­creased in­stal­ment on the mort­gagor, the TTMF ini­ti­at­ed a study to de­vel­op a fi­nan­cial mod­el that we may ap­ply over the term of the loan to re­duce the cost of the sub­sidy to the Gov­ern­ment and, at the same time, soft­en the im­pact of the in­creased or in­creas­ing rate on the mort­gagor."

The study was un­der­tak­en with the con­cur­rence of the Min­istry of Fi­nance. The TTMF is await­ing the out­come of the study to ef­fect any in­crease that may come out of the re­view process.

The of­fi­cial de­scribed the track record of ap­pli­cants keep­ing up with their mort­gage com­mit­ments as as "ex­cel­lent," be­cause gen­er­al­ly the re­cip­i­ents are salaried per­sons who make pay­ments through salary de­duc­tions.

Ne­glect of the mid­dle class

Mean­while, econ­o­mist In­dera Sage­wan-Al­li be­lieves the Gov­ern­ment may be ne­glect­ing the mid­dle class.

While she sup­ports the Gov­ern­ment's ini­tia­tives to pro­vide low-in­ter­est fi­nanc­ing for low­er-in­come peo­ple to buy homes, she thinks the same em­pha­sis should be placed on as­sist­ing the mid­dle class.

"With­out a doubt, sub­si­dies to sup­port low­er-in­come house­holds have their place, but re­al­ly, where do we draw the line on too much de­pen­den­cy, es­pe­cial­ly when we seem to be ne­glect­ing the larg­er mid­dle-in­come sec­tor which is the sec­tor in every econ­o­my which spurs growth?" she told the Busi­ness Guardian on Fri­day.

Last Mon­day, Prime Min­is­ter Kam­la Per­sad-Bisses­sar re­it­er­at­ed a hous­ing pol­i­cy of the pre­vi­ous ad­min­is­tra­tion for low-in­come cit­i­zens earn­ing less than $8,000 to pur­chase hous­es cost­ing up to $450,000 for no down­pay­ment and at two per cent in­ter­est.

The Prime Min­is­ter an­nounced the Cab­i­net de­ci­sion at the UNC's Mon­day Night Fo­rum in Barataria.

Sage­wan-Al­li ar­gued that more in­cen­tives for mid­dle-class hous­ing would ben­e­fit the econ­o­my even more.

"The mid­dle class is be­ing squeezed be­yond its lim­it to bear in T&T. In my view, at this time, a sub­sidised mort­gage rate for the mid­dle-in­come sec­tor would have sig­nif­i­cant­ly more eco­nom­ic trac­tion, des­per­ate­ly need­ed, than the pro­posed sub­sidy. There is idle stock of hous­ing avail­able, idle ca­pac­i­ty with­in the pri­vate sec­tor to re­spond to in­creased de­mand in the kind of fast track way on­ly the pri­vate sec­tor can," she said.

She called the pro­posed in­cen­tives for low-cost fi­nanc­ing for low­er-in­come peo­ple a "sub­sidy."

"What is the de­sired ob­jec­tive of this sub­sidy? If it is sim­ply to pro­vide an­oth­er hand out to those at the low­er end of the eco­nom­ic spec­trum then it will do this. It will though al­so lead to in­creased frus­tra­tion as there will be more per­sons qual­i­fy­ing for these loans with­out the state ma­chin­ery hav­ing the ca­pac­i­ty to sup­ply ad­e­quate­ly. Note, even with­out such a sub­sidised in­ter­est rate, the de­mand for hous­es in this price range is phe­nom­e­nal­ly high­er than sup­ply," she said.

She al­so ques­tioned the Gov­ern­ment's ca­pac­i­ty to pro­vide these hous­es to po­ten­tial buy­ers.

"The state mech­a­nism has not so far been able to pro­duce the vol­ume of hous­es to meet the ex­ist­ing de­mand. What, then, is the ef­fect of this added sub­sidy? A fur­ther in­crease de­mand for low-in­come hous­ing with­out the sup­port­ing ca­pac­i­ty to ramp up sup­ply. So, no, it will not im­pact the re­duc­tion of the hous­ing deficit, which ex­ists re­al­ly on­ly at this lev­el, but will ex­ac­er­bate it," she said.

Dr Ronald Ramkissoon, se­nior econ­o­mist, Re­pub­lic Bank, warned the Gov­ern­ment about ad­di­tion­al sub­si­dies that can strain cur­rent ex­pen­di­ture.

"How­ev­er, pol­i­cy­mak­ers must be care­ful of the im­pact of any ad­di­tion­al sub­si­dies stem­ming from such ini­tia­tives on to­tal gov­ern­ment ex­pen­di­tures. Fur­ther, they must pay par­tic­u­lar at­ten­tion to ef­fi­cien­cies or lack there­of in the de­liv­ery of hous­ing and oth­er ser­vices," he said.