FIRSTCaribbean International Bank Jamaica (FCIBJ) has announced plans to become the first mover in loan portability across financial institutions in Jamaica with a new loan programme that will see the bank absorbing some of the costs of switching loans from rival banks.

Yesterday, at the bank’s annual general meeting (AGM) held at the Jamaica Pegasus Hotel in Kingston, Robert Wright, general manager told the Business Observer that FCIBJ would absorb up to US$5,000 ($430,000) in fees associated with mortgages and US$1,000 ($86,000) in fees for personal and auto loans.

“It’s available for customers who wish to switch loans or mortgages from other institutions or customers who just come in for loans or mortgages straight off,” Wright said. The fee absorption also applies to loans for consolidation purposes.

“Our customers who successfully apply for either category would receive certain discounts: No commitment fees as well as absorption of some of the legal fees associated with the loan. So the registration for bill of sale or mortgage registration and attorneys cost as it relates to mortgages,” Wright said. “So if the registration cost for a car would have been $92,000, we will cover the equivalent of US$1,000. Similarly for attorney’s cost for mortgages we will cover up to US$5,000.”

The offer, which is a part of FCIB’s strategy in 2011 to improve its revenue generation and get a larger share of market, is good until April 30.

“In essence if you didn’t come to us you would have gone somewhere else, so the campaign would encourage you to switch your mindset to come to First Caribbean. It’s certainly a method by which we make it easier for customers to move their facilities around if they can obtain a greater deal at the institution.”

Wright said there is no limit placed on the value of the loans available to customers.

Mortgage rates start at 14 per cent, while home equity loans are 15 per cent. Interest rates on consumer loans range from 14 per cent to 14.99 per cent at FCIB. This compares to mortgage rates ranging from 14 per cent to 17.25 per cent across other financial institutions including building societies and commercial banks.

“Our rates are competitive, the terms are competitive and of course there is the incentive of much reduced fees,” said Wright of the initiative.

The move to improve loan portability follows a recommendation made by the Planning Institute of Jamaica (PIOJ) in its Growth Inducement Strategy for Jamaica in the Short and Medium Term. The Strategy speaks to a framework for robust economic growth, through partnership between the government and private sector to build and sustain an enabling environment for stakeholders in national development.

The strategy argued for the elimination of transfer tax and stamp duty on selected financial instruments.

The PIOJ noted that “stamp duties and property transfer taxes may be a factor inhibiting the portability of loans across financial institutions, and thereby acts as a constraint on the refinincing of debt.”

With the financial institutions absorbing some fees this removes some of the constraint for customers who wish to refinance and improves competition within the banking system.

It was a point also made by Minister of Finance Audley Shaw who said in January this year that he would examine the removal of transfer tax and stamp duty from loans, thereby improving portability and increasing competition within the financial sector.

“In my view we have to look seriously at removing the stamp duty on the transfer of existing loans in the system,” Shaw said. “There are issues such as the secondary mortgage market development. There is the question of removing transfer tax and stamp duty on corporate bonds and commercial paper. We need to get dynamism going in the whole area of corporate bonds and commercial paper. When implemented the approved growth inducement strategies will be a powerful kick start to economic activity especially in conjunction with some of the large government-led development programs that are now being implemented.”