Loan-to-value regime under the microscope

The Bank of Namibia’s (BoN) macro-prudential oversight committee is keenly observing whether the newly revised loan-to-value (LTV) regime will have an adverse impact on the banking sector. The regime allows individuals to buy a second home without a deposit.The central bank in October relaxed the LTV ratios, owing to shifts in Namibia’s property market, it said. The regime was originally introduced in 2017 to help prospective homeowners purchase homes. The LTV represents the amount of money lent to a borrower by a banking institution to purchase a property in relation to the property&#039;s price or valuation, and the deposit required from the borrower.“Notwithstanding the recovery witnessed in the domestic economy, as well as the sound and stable financial sector, activity in the housing and construction sectors remains muted. This lacklustre performance has been further exacerbated by the dampened credit extension, particularly for the property market, contributing to the ongoing sluggish growth observed within this sector,” the BoN said. Monitoring impactThe committee has reflected on the existing LTV regulations, which were introduced as a macro-prudential tool to contain speculative behaviour in the housing market, and recommended its further relaxation.It will continue to monitor the revised LTV ratios, and their impact on the property market, the central bank said. “The committee noted the amendments to the LTV regulation, which came into effect on 31 October, purposed to primarily support economic activity. The committee will continue to monitor the developments within the property market given the relaxed LTV limits and its impact."When the LTV ratios were relaxed for the first time in 2017, it required prospective homeowners to pay a 20% deposit on a second home, a 30% deposit on a third home, a 40% deposit on a fourth home and a 50% deposit on a fifth home.At the time, the bank said: “This regulation will give prospective first-time home-buyers a better chance of owning a home as they will be exempted from paying a deposit. This means the commercial bank will extend a home loan to the prospective first-time buyer and they will not be expected to pay a deposit".

Loan-to-value regime under the microscope

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Namibian Sun 2025-04-17

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Loan-to-value regime under the microscope

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Namibian Sun 2025-04-17

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