Mortgage lenders jockey for business with home financing deals
Now that the Government of Jamaica has eased the tax burden on real estate transactions, mortgage providers are already jockeying for market share with new financing deals.
At the same time that private banks are making it easier for property buyers to borrow, the band of mortgage rates at state lender National Housing Trust, NHT, allows more beneficiaries to qualify for zero rate loans, based on income below $15,000.
But economic thinkers are already telegraphing that while these initiatives will drive value in the property market, none of this is likely to result in cheaper home prices.
Jamaica’s mortgage market, according to industry sources, is currently valued at $400 billion, some $200 billion of which is controlled by state lender NHT. The rest is shared between private lenders, including JN Bank, Victoria Mutual Building Society, VMBS, Scotiabank, and National Commercial Bank, NCB.
Other commercial banks, such as Sagicor Bank Jamaica, have been positioning themselves with a parade of ‘specials’, including reduced processing time for loans.
Sagicor Bank has been advertising “up to 100 per cent” mortgage financing, a three-month payment holiday and “a special rate”.
NCB says it is working on its own offer and would speak more to its mortgage portfolio later.
In its latest salvo, JN Bank, which two years ago transitioned from a building society to a commercial bank, is promising 110 per cent financing for home purchases and related expenses, saying qualified borrowers who choose this mortgage option, will “not necessarily be required to make out-of-pocket payments when purchasing a property”.
The loan rate was not disclosed, but Saniah Spencer, chief of marketing and product development at JN Bank, said Tuesday that it would be “a low one for the life of the loan”.
At last report in 2018, JN had a mortgage portfolio in the region of $71 billion.
Last week, VMBS, which manages a $50-billion mortgage portfolio, also launched a 100 per cent mortgage offer at 8.5 per cent interest for microbusiness owners seeking to buy a home, as well as Jamaicans employed on contract.
Scotiabank, which was first out of the block after the Government’s announcement of a tax cut on property purchase, cut its mortgage rate to 6.99 per cent effective mid-March – a rate it said was the lowest in the market.
The adjustments to transfer taxes and stamp duty announced by Finance Minister Nigel Clarke and approved by Parliament as part of the measures contained in the national Budget, are projected to reduces the taxes on property transactions from nine per cent to less than three per cent. They began taking effect on April 1.
The Caribbean Policy Research Institute, CAPRI, said at its budget review forum on March 25 that it expected property valuations to spike as a result of the reduction in taxes. But panellists at the think tank’s forum, where the average price of a two-bedroom home was quoted at $13 million, also said they did not expect home prices to fall.
Housing need in Jamaica annually is estimated at around 20,000 units.
In a 2016 study called ‘An Assessment of the National Housing Trust’, CAPRI reported that while NHT has built more than 94,000 houses, housing completions fluctuated at around 0.1 per cent of the population between 1998 and 2014. The report also noted that while over 60 per cent of Jamaicans owned their own homes, many of the dwellings were not of adequate standard.
The think tank suggested that the NHT consider rental vouchers as a solution to fill the housing gap.
Starting this month, NHT will lend at rates from zero to five per cent, depending on income band; the loan cap has been raised from $5.5 million to $6.5 million for individual contributors; and its products now include an inter-generational mortgage, allowing children to inherit their parent’s obligation.