VMBS adjusts mortgage rates to cut loan-servicing costs
Published:Friday | May 27, 2011 | 12:00 AM
- Delinquencies at 5-10% of portfolio
Victoria Mutual is touting its new mortgage rates, which in one category drops to a position recommended by realtors to drive real-estate sales, as an opportunity for its borrowers to clear arrears on existing loans.
The building society, which is number two in a market of four private mortgage lenders - only two of which are mutual operations built by members - appears faced with rising delinquencies on its loan book, but says the accounts in default are less than 10 per cent of the portfolio.
Effective June I, VMBS residential mortgages will be priced at 10.4 per cent for savers and 11.99 per cent for non-savers on new loans.
"The cut is a maximum 200 basis points in all categories," said Peter Reid, senior vice-president and chief operating officer at VMBS.
Other loan categories, currently priced in a range from 16.49 per cent for home-equity loans to 21 per cent on commercial property, will also be cut by two percentage points on June 1, if the accounts are in good standing.
Accounts that are not current will only be cut by 0.5 per cent until arrears have been clears, at which point the additional 1.5 per cent reduction will be applied.
Reid says that non-current accounts are "much less than 10 per cent of portfolio, but more than five per cent."
At December 2010, the Bank of Jamaica reported that private mortgage lenders had 6.9 per cent of non-performing loans on their books.
And, of the J$3 billion provisioned by the sector for loan losses, close to half, J$1.38 billion, was from VMBS.
Current mortgage holders previously issued loans within the 10.4 per cent to 11.99 per cent band, will not see their rates adjusted on June 1.
"We are cognisant of the fact that a significant number of persons have been negatively affected by the prevailing economic climate," said VMBS chief executive officer Richard Powell, quoted in a company statement on the rate cut.
"This reduction in interest rates will assist many of our members, who are experiencing difficulty in meeting their monthly mortgage obligations," he said.
VMBS manages a J$29-billion loan portfolio, of which J$28 billion are residential mortgages. It has a 34 per cent share of the J$86-billion mortgage market, while market leader Jamaica National has 46 per cent control.