Activity in real estate auctions and the private contract market is low due to leniency from mortgage lenders who are refraining from confiscating debtors’ homes as the economy struggles to recover from the COVID-19 pandemic, the Realtors Association of Jamaica, RAJ, said.
Aware of the implications for jobs, business and disposable income since the start of the pandemic, mortgage institutions have, since April 2020, opted to support rather than punish borrowers who have fallen or appear to be in arrears.
Aid for mortgages included a moratorium on mortgage payments for up to 12 months, and more recently, mortgage add-ons such as a pre-approved line of credit up to $ 1 million, no deposit fees, and extra time to repay. …
“Now we have credit unions in the field of mortgage lending, and with this level of competition, they determine a single-digit interest rate on mortgages. We expect this to continue, ”said Donovan Reed, President of the Association of Realtors.
Banks are reluctant to talk about how much the bailout program has cost their institutions, but the government’s National Housing Fund, NHT, estimates it will waive about $ 418 million on its loan for the fiscal year ending March 2021 due to special measures introduced since April. to help NHT pledgers.
Housing agency data as of September 2020 showed that mortgage delinquency rates jumped to 15 percent on 180 days overdue loans, up three percentage points from the 2019 comparative period. Defaults were significant among women and the 18-29 age group, but the largest affected group was the over 60 age group, among which defaults rose five points to 24 percent.
The moratorium on mortgage payments officially ended in March 2021, but it is clear that mortgage institutions are still quietly helping clients who ask for help.
JN Bank, the largest holder of mortgage accounts in the private market, reported Financial collector A very large percentage of its pledgers have returned to servicing their loan accounts this week, but this is reassuring to participants who may still have trouble reaching out to a bank to discuss a workable solution.
Scotiabank Jamaica, which sells mortgages through its construction subsidiary, said it continues to assess its customers’ needs on a case-by-case basis, providing support as needed, and that support offered usually includes many options.
“I think a number of mortgage companies are currently trying to be more understanding,” Reid said.
Counting the number of homes for sale under private contract or foreclosures before and after the pandemic was not readily available, but Reed said there has been a decline in overall list observation based on general observation of the listings.
“During this period, we certainly saw that mortgage companies backed down a bit in terms of the units over which they would exercise authority to sell. The National Housing Fund, for example, suspended the sale of the private property they were selling, ”Reed said.
While banks are lending a helping hand to those seeking mortgage help, institutions are considering other options to recoup money that would have been delayed or lost through aid programs.
Competition among institutions for mortgages is heating up. So far, this seems to have supported the downward trend in mortgage rates in favor of borrowers.
Mortgage rates have shifted southward even before the pandemic. The Bank of Jamaica, according to the latest data, estimated the average mortgage rate at 7.19% in June, up from 7.22% in May and 7.24% in April.
For comparison, the average rate on personal loans, which fluctuates and fluctuates, but generally remains in the range of 20-21%, fell from 20.87% in April to 18.91% in May, but returned to its comfort zone at 20 , 69%. cent in June.
“With regard to rates on unsecured loans, we believe that the decision of some banks to expand credit lines to a segment of the market, usually served by payday lenders and microloans, may have an impact on rates. Higher rates may be the result of an attempt to offset the higher risk associated with lending to this market segment, ”says JN Bank’s market analysis.
RAJ President Reid added that mortgage rates are falling over time due to increased competition between lenders and more flexible monetary policy by the Bank of Jamaica – a reference to the central bank’s low interest rate policy that has helped lower lending rates to businesses and consumers over time. …
Since August 2019, the discount rate has been held at a record low of 0.5 percent for two years. The Bank of Japan said it will consider at the end of this month whether it will change its position and raise rates later this month. to protect your inflation targets. If he does raise rates, loan rates are likely to rise as well, and in a shorter period of time than they have tended to decline over the past few years.
Regarding the potential for more mortgages to go bankrupt due to rising rates of COVID-19 infection and concerns about the adverse business impact from ongoing economic lockdowns, Reed said the sector is set to manage risk.
“The mortgage is backed by securities,” he said. “We really haven’t seen serious consequences for the work of civil servants; and among those who combined their NHT benefits with mortgage loans from banks, we had no consequences, ”said the RAJ president.