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GSB aligns mortgage rate with 100m record

Published:Sunday | September 18, 2011 | 12:00 AM
Sprint champion Usain Bolt.
Courtney Lodge, CEO of GSB Credit Union.
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Avia Collinder, Business Reporter

GSB Co-operative Credit Union, the community lender that led off a round of rate cuts by mortgage companies in March, has sliced its loan rates again to single digit.

GSB, backed by secondary mortgage financing, has chopped another 2.37 percentage points off its mortgage rates to homebuyers - from 11.95 per cent in March down to 9.58 per cent in September and has committed to lowering the rate each time a new 100-metre sprint record is set.

The new price applies to loans of J$2.5 million to J$15 million repayable over 35 years.

GSB Chief Executive Officer Courtney Lodge said its amended mortgage pricing policy is facilitated by funds secured from Jamaica Mortgage Bank (JMB).

Patrick Thelwell, general manager of the JMB, said Monday that the wholesaler is making funds available to GSB at 7.85 per cent, which is the rate being paid on the last bond issued by JMB to raise capital to fund secondary mortgage market transactions.

"We issue money at rates based on our marginal cost of funds, and then we share the spread with retailers like GSB in a 50/50 ratio," said Thelwell.

"What we want to do is to compress and maintain low rates in the market. The aim is to increase competition. We are encouraged by what GSB is doing," he said.

The state bank wants to pour as much as J$25 billion into the mortgage sector over five years.

In April, JMB issued a J$500 million bond on the  private placement market using First Global Financial Services Limited as broker, which was oversubscribed by 10 per cent.


JMB is awaiting approval by Cabinet to do another J$500-million bond placement.

The new GSB rate undercuts the August 1 cut by Jamaica National Building Society (JNBS) - the main player in its sector with 47 per cent of a mortgage loan market last estimated by the central bank at J$86 billion.

JNBS now offers rates ranging from 11.49 per cent to a minimum of 9.8 per cent for applicants who have at least 10 per cent of a combined gross salary in a JNBS savings account.

Lodge says GSB's total mortgage portfolio now stands at J$474 million - out of a loan pool of J$2.02 billion among credit unions - increasing by 63 per cent from January 2011 when its portfolio was valued at J$290 million.

The new GSB rate is being marketed as "GSB's Challenge to Champion Athletes" with the company CEO stating that the company intends to tie rates to any new record broken by Jamaican athletes in the 100-metre sprint.

"We have again lowered rates to provide more Jamaicans with an opportunity to own their own home; to encourage our Jamaican athletes to run faster, make us all proud and allow more Jamaicans to benefit from lower rates on interest from GSB," he said.

To qualify for a loan of J$2.5 million for 30 years, a gross salary of J$70,000 monthly is required; while qualifying income for the $15 million to be repaid over 30 years is $400,000 gross monthly. Debt service ratios must be no higher than 35 per cent of gross salary.

"GSB will lower this rate to match any new world record in the 100-metre sprint."

Applicants for the new mortgage loan must become GSB members and must be members of any professional group including "public-sector workers, all professionals — doctors, lawyers, media workers, etc - and their families. They must demonstrate ability to service the loan and acceptable collateral," the CEO said.

The maximum disbursement to each applicant will be 90 per cent of the purchase price or value of the property, whichever is lower.

Funds are to be used to buy, build or repair acceptable property, or to refinance mortgages at other financial institutions.

Lodge said this second mortgage rate cut is also in line with a New Year's resolution, the "GSB Manifesto", which aims to help "transform the financial services sector."

"This is one way in which we are encouraging other financial institutions to lower their rates. They did so when we launched the 11.95 per cent, and I hope they will do so again, so that Jamaicans can benefit."

austanny@yahoo.com