Scotia Jamaica Building Society (SJBS), which saw its mortgage portfolio grow to more than $13 billion during its last financial year, said its competitors appeared to be concentrating on offering the lowest rates, but said it will not be part of any price war.
The society, in the year ended October 2012, grew its mortgage portfolio by 34.24 per cent to $13.8 billion compared to $10.27 billion at year end October 2011.
Profit after tax for the review period was $703.85 million compared to $578.15 million last year.
The performance almost equalled that of last year when the mortgage portfolio grew 35 per cent to $10.27 billion at year end October 2011, up 35.3 per cent from $7.59 billion in 2010. According to SJBS General Manager Gladstone Whitelocke, the 2010-2011 results was the best performance in the company's 17-year history.
Growth in 2011 was buttressed by the purchase of a block of mortgages from Sagicor for $700 million, but the last year's growth was all attributed to new mortgages written, Whitelocke said.
"We stole market share from the big guns. The competition seems to be focusing a lot on who has the lowest rate, (but) we will not be a part of any rate war," the general manager said.
"SJBS remains the leader as well in terms of rate reduction and we got significant take-up from that," he said.
The current posted rate is 10.75 per cent annually for first-time mortgages, but the general manager notes that this can vary depending on a complete suite of services, including car loans, which are also made available to borrowers.
"We have a rate now which is fixed for three years. There will be no withdrawal of the offer after one year," he said, apparently referring to institutions whose rates are subject to change after that period.
According to Whitelocke, growth in the mortgage segment was positively impacted by the move by the National Housing Trust (NHT) to permit joint applicants to access as much as $9 million in loans - depending on their salaries - and allowing them to combine those funds with money from other sources such as SJBS.
However, he said growth was somewhat constrained by limited availability of new housing stock in the $25 million to $35 million price range, which is now being sought after by the society's target demographic.
"There is not a lot of development at that price point," Whitelocke said.
To support the momentum of growth in 2012-2013, the building society plans to deepen tactical alliances with realtors and to bring valuators, quantity surveyors, lawyers and tax officials together in information sessions which will benefit potential homebuyers. "These are value-added seminars. They will get free consultations with them," the SJBS general manager said.
Whitelocke maintains that the quality of the society's book is good with all loans fully secured. Currently, he said, non-performing loans - those not serviced for three months or more - represented less than five per cent of the entire portfolio, five per cent being the industry standard.
secondary market concerns
The general manager said he was not confident that the secondary mortgage market, under which the Jamaica Mortgage Bank is offering to buy package mortgages, was a good bet for Jamaica at this time, given the bad history of the product in recent times internationally.
"It is easy to package assets and sell them. How they perform post sale is another story," Whitelocke said, adding that "there are relevant regulations which need to be crafted and implemented".
Whitelock noted that following the Jamaica Debt Exchange (JDX) in 2010, the mortgage asset became king on the books because of the lowering of interest rates, thereby attracting new entrants, including commercial banks and credit unions, and hence an increased aggression in the market.
The JDX is an initiative of the Government of Jamaica with an objective of exchanging debt in the form of Jamaican-dollar and United States-dollar denominated bonds - or old notes - which carry high interest rates, for new notes with lower interest rates and extended maturity.
SJBS holds third place among building societies with 14.72 per cent market share as at June 2012, according to Bank of Jamaica data.
The bank, which publishes mortgage portfolios for building societies - FirstCaribbean, SJBS, Jamaica National and Victoria Mutual - estimated the total market at $90 billion as at June 2012. Market leader in the segment is JNBS with 47.04 per cent of market share.
At 9.39 per cent on its loans, VMBS has the lowest rates. JNBS is offering 9.4 per cent, and VMBS had announced a special rate of 6.85 per cent on US dollar denominated mortgages earlier this year.
The war over rates began in the first quarter when National Commercial Bank, on March 5, introduced its 9.5 per cent mortgage rate.