Bankers refuse premier’s appeal to delay interest rate hikes

Premier Wayne Panton says an appeal he made to Cayman’s bankers to slow down increases in interest rates has been rejected.

In a statement issued Friday afternoon, Panton said he had asked the local retail banks to delay implementing interest rate hikes in tandem with rate increases by the US Federal Reserve, which sets the prime interest rates for borrowing.

On 3 May, the Federal Reserve approved its 10th interest rate increase in a little over a year – this time by another 0.25%. Banks in Cayman immediately followed suit.

The premier said he had met and corresponded with the Cayman Islands Bankers Association twice in the past year, including most recently this month, stating that while local banks have historically immediately increased rates as soon as the Fed does, “there is no reason why this must be the case”.

He cited banks in Bermuda as not automatically increasing their prime rate in line with the Fed increases.

Panton said he had requested banks give borrowers 60 days notice before increasing rates following Fed hikes, but “the banks have once again collectively refused to consider this simple mitigation measure”.

‘Time to adjust’

“In June of last year, I met the bankers and asked them to consider adding a longer notice
period before increasing interest rates. The rationale behind this request was to give people more time to adapt, to plan and adjust their monthly budgets to better handle the higher cost implications,” he said in the statement.

“At that time, the banks responded to the request justifying why they felt it was necessary
to increase rates immediately. Only one bank was willing to agree, and they applied a delayed implementation period, but since the other banks did not follow suit, they discontinued it.”

Earlier this month he wrote to the association again, repeating his request, but was again denied.

In his statement, he said, “Given this refusal, I would like to publicly register both my disappointment in their position to date and also my expectation that they will engage in further dialogue with Government to determine how best to alleviate the impact of future rate increases.

“I also honestly do hope they will reconsider their position regarding the proposed 60-day
implementation delay on interest rate increases and also re-examine the policy of automatic local rate increases every time the Fed raises the US Prime Rate.”

In his letter to the association, Panton pointed out that the local increases usually occurred with less than three business days’ notice.

Private member’s motion

West Bay West MP McKeeva Bush is also pushing for some relief from local interest rate hikes.

In a call to Radio Cayman’s ‘For the Record’, he confirmed he planned to bring a private member’s motion to Parliament, seconded by Bodden Town West MP Chris Saunders, calling for a meeting between banks and the government to discuss reducing interest rates immediately and not increasing them for the next two years.

The motion also calls for government to amend legislation to launch an interest-rate-setting body.

Parliament is set to begin its next meeting on Wednesday, 7 June.

Both Panton and Bush have raised concerns about homeowners having to default on their mortgages due to the increasing interest rates.

Panton, in his statement, said the banks were “insisting that their residential mortgage portfolios are not ‘degrading’, however, my colleagues and I are continually hearing from constituents that their mortgage payments have increased to an unsustainable degree – in some cases up to $1,000 or more per month.

“This is a huge increase that might negatively impact any family in these times. We must guard against Caymanian homeowners potentially losing their homes due to the inability to meet increased interest charges.”

In the absence of cooperation from the retail banks on delaying interest rate increases, Panton encouraged borrowers to investigate fixed-rate mortgage options “and to maintain open lines of communication with their lending institutions”.

He added, “There is hope on the horizon, as most economists predict that the current trend of increasing interest rates is nearing its peak, and rates should start falling soon.”