KINGSTON, Jamaica –Interest rates on mortgages have begun to climb as the island’s mortgage lenders react to a move by the Bank of Jamaica last week Monday to raise interest rates on open-market instruments to ease inflationary pressures.
The Jamaica National Building Society on the weekend announced that it would be increasing interest rates on mortgages to new borrowers effective today.
In a release to the media on Saturday, JNBS said the interest rate on mortgages will move from an across-the-board rate of 12.99 per cent to 13.5 per cent for members and 13.75 per cent for non-members.
The building society, which controls about 55 per cent of Jamaica’s mortgage market with some $55 billion in assets, explained that the decision to hike rates was taken following an overall 2.5 per cent rise in interest rates on open-market instruments by the BOJ over the past four weeks.
The BOJ’s increased rates represent a hike of between 85 and 150 basis points. The central bank said the revisions were sparked by concerns about the rising trend in inflation and its impact on the attractiveness of Jamaica dollar investments.
Earl Jarrett, the general manager of JNBS, said the increased mortgage interest rates would not affect existing borrowers or those who have got letters of commitment, but warned that “if the central bank continues to employ increased interest rates as a means of mopping up liquidity, then financial institutions will be forced to continue adjusting their lending rates in order to remain competitive”.
Up to yesterday, there was no indication from the island’s second-largest mortgage lender, the Victoria Mutual Building Society, or any of the other lenders in the market on whether they would also be increasing interest rates on mortgages. VMBS currently lends at 12.99 per cent while the interest rate at Scotia Jamaica Building Society ranges from 16.65 per cent to 17.5 per cent.
Economist Orville Johnson of Today’s Money Ltd said the upward adjustment in interest rate by the BOJ might cause more financial institutions to adjust interest rates.
“There are those persons who feel that the movement in interest rates is not necessarily going to be there for a long time but, perhaps, we would wait a little bit to see if the high interest rates persist before making that move,” Johnson said.
Real estate agent Anya Levy and president of the Realtors Association of Jamaica, Edward Wint, said the increase was cause for concern, suggesting it might become harder for new home buyers to qualify for and repay loans.