Sun | Feb 26, 2017

RBC hones mortgage strategy - Signs with NHT

Published:Sunday | November 11, 2012 | 12:00 AM
Roger Cogle, market head of personal banking, RBC Royal Bank Jamaica Limited.- Contributed

Avia Collinder, Business Writer

RBC Royal Bank Jamaica said last Wednesday that one year into its flirtation with the mortgage market, it has secured "just about" one per cent of a more than J$200-billion sector - which would place its portfolio at or around J$2 billion.

Roger Cogle, whose title is market head - personal banking, said he expects this level of growth to be replicated next year with the signing of a new agreement with the National Housing Trust (NHT) on October 29 in which borrowers can access mixed funds jointly financed by both parties.

Essentially, RBC believes it should be able to double its mortgage portfolio to about J$4 billion by November 2013.

Under the NHT agreement, the borrower will access the NHT maximum - J$4.5 million for individuals or J$9 million jointly - at the housing agency's concessionary rates, while the balance of the loan funds from RBC will be priced at 9.39 per cent Cogle said.

NHT's mortgage rates currently range from one per cent to seven per cent depending on salary range.

RBC charges no commitment fees on its loans, which Cogle pitches as a three per cent saving relative to what other mortgage rivals quote.

The bank also sets a debt-servicing limit of 40 per cent of gross monthly income, meaning that the monthly payments on the borrowers' combined debts should be no higher than four-tenths of their earnings.

Demand for homes

Cogle said growth in RBC's mortgage portfolio has been fuelled largely by demand for homes in the mid-income and upper-income residential markets, and pushed primarily by word of mouth between customers as well as some amount of advertising.

RBC Jamaica is not widely known as a mortgage provider. Unlike its rivals, banking groups FirstCaribbean Jamaica and Scotiabank Jamaica, RBC does not operate a building society subsidiary. RBC's total loan portfolio as reported by the BOJ was J$29 billion in June - placing it at the No 3 slot of seven commercial banks in a loan market worth J$279 billion.

The J$200 billion estimate of the mortgage market differs from the central bank's count, which in June was estimated at J$90 billion. The Bank of Jamaica, however, publishes mortgage portfolios only for building societies of which there are four - FirstCaribbean, Scotia Jamaica as well as Jamaica National and Victoria Mutual - while the broader estimate includes the NHT portfolio.

The mortgage activity of RBC and banking group NCB, for example, would be captured inside their wider loan portfolios. Mortgages are also offered by some credit unions.

NHT's mortgage portfolio was estimated at J$132 billion at March 2012, up from J$110 billion the previous year, according to finance ministry data.

Cogle said that RBC expects rapid growth in the J$12 million to J$20 million home loan segment now that the bank has signed with the NHT, and borrowers can jointly access as much as J$9 million from the housing agency.

RBC is also targeting growth in home equity loans which Cogle estimates is worth as much as 50 per cent of the mortgage market.

"We provide financial advice on how homeowners can reduce mortgage payments, save faster for their child's education and reach other goals," he told Sunday Business.

The bank is a subsidiary of ultimate parent Royal Bank of Canada and falls under the RBC Caribbean network.

The bank is also No 3 when valued by assets, which was estimated by the BOJ at J$51 billion in June.