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Mortgages of 110 percent are now available to low income earners, Absa said on Monday as it adjusted its lending criteria.

"Absa has become the first bank to provide relief to low income earners by offering 110 percent bonds with a monthly income up of to R11 000," the bank said in a statement.

"The turn in the economic cycle is becoming evident and as such we need to review our customer offerings.

"Although the South African economy still finds itself in recession after contracting for three consecutive quarters up to mid-2009, it is important to note that to date, the interest rates have been reduced by 500 basis points (bps) since December 2008 and are projected to drop by a further 50 bps later in the year," said Luthando Vutula, managing executive of Absa Home Loans.

He said this meant consumers were experiencing relief and with lower inflation and household payments there should be a notable reduction in loans in arrears.

"In light of this, and a slight improvement in the property market, our loan to value caps will be aligned with the prevailing market conditions."

He said ABSA would continue to weigh up the consequences of its decisions and the impact these could possibly have on its customers.

The bank added that it was providing up to 95 percent mortgages to Absa customers who need a bond of up to R1.5-million if they used Absa internal channels.

A mortgage of 90 percent was offered if they used external channels such as mortgage originators.

Houses from R1.5-million to R2.7-million would still require a 10 percent deposit and houses more than R2.7-million a 15 percent deposit," Vutula said.

Vutula said it was important to note that the normal lending criteria would still be taken into account.

"We encourage all of our customers to remain astute and discuss their home loan needs with us.

"It is only through meaningful interviews and accurate affordability analysis that we will be able to establish a sound needs analysis and offer the best solution," he said.

Residential Repossessed Assets (RRA) and Absa distressed properties would also be available for customers to consider.

"Absa customers will get 100 percent on these home loans in order to make it possible for more of our customers to own their own homes," he said.

At the beginning of the year Absa reviewed and revised all of its agreements with mortgage originators, Vutula noted.

"These agreements remain unchanged," he said.

Despite lower interest rates, the economy was expected to remain under a lot of pressure until the end of the year, which would continue to impact employment, household income and the property market, he said.

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