JN ponders mortgage rate cut
Published:Wednesday | March 9, 2011 | 12:00 AM
Avia Collinder, Business Writer
The Jamaica National Building Society (JNBS), the island's largest mortgage company, said it will be cutting loan rates, currently ranging between 14 and 18 per cent, to stimulate its portfolio, but it has not disclosed the size of the adjustment.
Realtors, however, are hoping for a drop to eight to10 per cent.
JNBS, which controls about 47 per cent or J$40 billion of the J$85 billion mortgage market, said it intends to cut rates by April.
It will also be reviewing rates for new mortgage holders in the new financial year with the possibility of cutting those from their current levels of between 13.75 per cent and 14.49 per cent.
Wanica Purkiss, JNBS executive for mortgages, said last week that the decision to reduce interest rates was based on the need to stimulate the society's portfolio. "If interest rates continue to trend down the way we expect, then there will be more persons purchasing property."
The move comes on the back of the launch by GSB Credit Union of a new loan with interest of 11.95 per cent, said to be the lowest rate now being offered by a private financing agency.
Local real estate interests have responded to GSB's move, suggesting that interest rates need to go even lower to stimulate the middle income property market.
Howard Johnson Jr, president of the Realtors Association of Jamaica, said that if rates were reduced to six per cent, for example, there would be an overwhelming increase in sales thus generating more revenue for the Government by way of transfer and stamp duty taxes.
Faster inventory disposal
"Although the rental market would experience a decline somewhat, realtors would be pleased knowing that they can dispose of inventory faster," he said.
"Significant reductions in mortgage rates would be a win-win situation for all stakeholders."
Johnson said profit for mortgage companies would increase with a single-digit rate.
"Mortgage institutions would generate more mortgages, buyers would qualify more easily, sellers would dispose of their properties much more quickly, realtors would experience an increase in sales, the Government would earn more revenue and Jamaica would now become even more attractive to overseas purchasers, including returning residents," he said.
Edwin Wint, the association's past president, said rates of between eight and 10 per cent from private lenders would provide enough stimulus.
"With private sector mortgage institutions offering mortgage loan interest rates on the average between 15 per cent to 19 per cent, this is impacting negatively on the property market in terms of the volume of properties changing hands," he said.
"The ability to qualify for mortgages at these rates is not within the reach of the average middle-income person and prospective buyers have to be compromising their taste and spatial requirements to afford a home well below their expectations in this economic climate."