Lending rates to businesses continue to climb
INTEREST rates on local currency business loans are expected to increase further by the end of the month.
On the other hand, rates on personal loans are expected to decline, according to the Bank of Jamaica (BOJ) Credit Survey report published last week.
More specificially, lending rates on Jamaican dollar loans to businesses are expected to jump from 13.2 per cent at December 2013 with respondents predicting 16.6 per cent in September 2014.
Personal loans should drop from 20.6 per cent to a projected 18.86 in September; while the prime lending rate is expected to decline from 18.6 per cent to 17.22 per cent.
“Despite net injection of liquidity into the system in the review quarter, lenders continued to attribute the increase in rates to tight liquidity conditions which contributed to a reduction in the pool of funds available for lending,” said the report.
For the July-September 2014 quarter, lenders anticipate a stronger increase in the amount of Jamaica dollar credit to be made available to micro businesses in all sectors, except entertainment and mining and quarrying, while no change is expected for foreign currency loans, stated the report.
Regarding large businesses and the corporate market, some lenders reported increased competition for loans in that segment.
“This has contributed to lenders increasing efforts to solidify their positions in the market,” stated the report.
Business loans account for 39 per cent of all loans, with personal loans accounting for 61 per cent in the June quarter. It’s a slight dip for the business sector, as the previous March 2014 quarter indicated that total business loans accounted 42 per cent of the $468 billion in total loans across the financial sector.
In January 2014, the BOJ introduced its Credit Conditions Survey in order to reveal “trends” in the domestic credit market and to improve lending efficiency.
Education loans are expected to assist in driving loan demand in the September quarter amid fluctuating interest rates.
“Lenders anticipate an increase in personal loans across all loan categories covered by the survey,” said the report. “In particular, higher demand is expected for credit cards, mortgages and other loans collateralised by real estate.
“In addition, a high demand for education loans is expected to drive demand for personal loans in the September quarter.”
