Mortgage rate wars

Lenders in fight to offer better deals

BY JULIAN RICHARDSON Assistant Business Co-ordinator

Wednesday, March 21, 2012

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COMPETITION is heating up among lenders in the mortgage industry, with at least two building societies moving to temporarily undercut the 9.5 per cent residential mortgage rates introduced by National Commercial Bank (NCB) earlier this month.

NCB jolted the market two weeks ago when it announced that it was re-entering the mortgage industry with a loan facility featuring interest rates as low as 9.5 per cent, the lowest by a private entity.

But Jamaica National Building Society (JNBS) and Victoria Mutual Building Society (VMBS) have both responded with special lower rate offerings, albeit for limited time periods.

JNBS was the first to act, when immediately after NCB's announcement, it rolled out a 9.4 per cent special that runs until April 30. VMBS threw its hat in the ring this week when it rolled out rates as low as 9.39 per cent until the end of August.

Neither of the building societies acknowledged that their respective moves were in direct response to that of NCB.

"Jamaica National continues to focus on its core business and its goal of assisting Jamaicans to own their own homes," stated JNBS Mortgage Operations Executive Wanica Purkiss. JNBS's 9.4 per cent rate adjustment comes against the background of the 9.8 per cent level it set last year, which is well down from the 13.75 per cent level in early 2010.

VMBS said its special offer, which includes a 6.85 per cent rate for select foreign exchange mortgages, is the beginning of the company's "Jamaica 50 celebrations". VMBS last year reduced its rates by two percentage points on new residential loans for owner occupied properties, moving to 10.40 per cent for savers and 11.99 per cent for non-savers.

"Victoria Mutual sees this as an excellent way to provide value to persons seeking to acquire residential properties during this milestone period of our nation's 50th year of Independence," VMBS president and CEO, Richard Powell, said in a statement.

But NCB, Jamaica's largest financial institution, has sought to separate itself from its competitors by highlighting that the key difference between the products is that its offer is unlimited.

"We took our time to develop a product that speaks to one of the most common aspirations of every Jamaican — homeownership — and our package reflects the care that went into helping individuals achieve this. What is important to note, as consumers explore their mortgage options, is that the NCB low interest rate of 9.5 per cent is not a promotion; this is our rate and is not bound by the timelines we have seen popping up in recent days," NCB senior general manager of retail banking, Audrey Tugwell Henry, told the Business Observer yesterday.

She stressed that the only time-bound promotion attached to the NCB mortgage is a cash-back incentive of up to $200,000 for qualified applicants who apply by August 31, 2012.

Bank of Jamaica statistics reveal that the country's four building societies had a combined loan portfolio of J$88 billion at the end of 2011. JNBS is the market leader with some $41-billion worth of loans, followed by VMBS with $28 billion. Scotia Jamaica Building Society (SJBS) and FirstCaribbean International Building Society (FCIBS) share less than a fourth of the market with portfolios totalling $11 billion and $8 billion respectively.

It is unclear whether SJBS and FCIBS will follow in the footseps of the two major players by introducing cheaper rates, promotional or otherwise.

Mortgage rates have plummeted to all-time lows in Jamaica, with building societies across the board cutting rates significantly within the past year.

Realtor Andrew Issa, who runs the Coldwell Banker Jamaica franchise, said in an earlier interview that the downward trend in interested rates had boosted the real estate industry, which he claimed sold more property in 2011 than it had in previous years.

"Interest rates coming down is the key factor to boosting the industry. Anything below 10 per cent is fantastic news and can only be good for the whole industry and construction going forward," Issa said, followng NCB's announcement of its 9.5 per cent mortgages.

NCB, up to 1999, offered mortgage facilities through its trust and merchant arm, now choosing to return to the market after more than a decade on the sidelines.

The National Housing Trust offers the cheapest loans in the industry, with interest rates from one to seven per cent for loans up to a ceiling of $4.5 million.




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