Credit union competing on price for mortgage business
Published:Wednesday | August 18, 2010 | 12:00 AM
First Regional Co-operative Credit Union (FRCCU) is bucking the trend of home-loan providers, holding mortgage rates firm despite interest rates on bank loans heading south.
First Regional, with 10 locations spread over two parishes - St Mary and St Ann - has slashed five per cent off the previous interest rate of 18.5 per cent to 13.5 per cent.
This rate puts the credit union in a competitive position against private lenders whose core business is mortgage loans.
The No. 1 operation in the mortgage market, Jamaica National Building Society, prices its loans at 13.75 per cent.
Other rates range up to 17-18 per cent.
"We have noticed lots of housing developments now on the market, (and) there are persons who may want to take advantage of them," said FRCCU chief executive officer Patricia Smith.
The credit union is offering 100 per cent financing to a maximum of J$10 million, inclusive of 15 per cent of the sale amount paid into a share account at the institution.
No defined limit
Home-loan clients can also borrow against their share account balance to pay the deposit on the land or residence being purchased.
Smith said the credit union has not set any defined limit on the pool of funds available at the lower 13.5 per cent rate, noting that FRCCU would be gauging demand.
The credit union's mortgage portfolio now stands at J$270 million.
"We can take risks based on our level of institutional capital," said Smith.
"Even with the time value of money factored in, real estate as collateral is much better than cars which depreciate at a faster rate."
To qualify for an FRCCU mortgage, applicants must be living or working in St Ann or St Mary, had previously lived or worked in either parish, or have relatives who have lived or worked there.
Healthy capitalisation
In the mortgage business for the past 10 years, Smith said the credit union, which was born out of the 2006 merger of St Ann Co-operative Credit Union and its counterpart in St Mary, is able to offer the long-term loans of up to 25 years duration because of its healthy capitalisation, now at 16 per cent of assets.
"This exceeds international standards," the organisation's head noted.
With assets of J$2.32 billion at May this year, FRCCU's capital base improved from J$382 million in December last year to J$512 million at midyear 2010.
Saving deposits at the credit union was J$1.71 billion in May, 10 per cent more than at the same time last year, while total loans stood at J$1.6 billion.
In 2009, the loan delinquency rate at FRCCU was held below five per cent, falling to three per cent in December, Smith said.