Jamaican authorities are being urged to find workable solutions for homeowners facing financial hardship from rising mortgage rates.

Several homeowners with variable mortgages told Observer Online that they have been badly hit by a string of increases to their monthly payments over the past two years— hikes that have left them frustrated and financially strained.

The mortgage payments have been pushed upwards by higher interest rates, the Bank of Jamaica (BOJ) having increased its policy interest rate – the rate the central bank offers to deposit-taking institutions (DTIs) on overnight placements – from 0.5 per cent in October 2021 to the current level of seven per cent.

Ballooning peril insurance premiums, which have gone up by as much as 60 per cent in some instances, have exacerbated the financial burden for homeowners such as Sherika Jones*.

“It was a joint mortgage with my husband and we got joint financing from National Housing Trust (NHT) and Victoria Mutual (VM). The home we purchased was three bedrooms, two bathrooms and then we had a one bedroom apartment with its own kitchen, dining and bathroom also on the property. It cost approximately $32 million,” Jones said. “My husband didn’t qualify for the full $6.5 million from the NHT so instead of a joint amount of $13 million we received approximately $9 million and the rest we borrowed from VM.”

She went on to share that when repayments began in 2022, her monthly mortgage was $211,000. However, by the end of 2023 her mortgage had increased to just over $250,000.

“The initial interest rate was 6.95 per cent on about $25 million, so when we began repaying the loan, we were paying approximately $211,000. It increased once in 2022 and then maybe early 2023 it increased again which was when I reached out to the bank and started asking questions,” she said. “I literally had to ask them, ‘who can afford this really?’ It jumped from 6.95 per cent to 7.75 per cent and that was in 2022. Then it jumped to 9.5 per cent which to me is just ridiculous. So our mortgage now is about $250,000 per month.”

According to Jones, having expressed that the amount had become too much for her to afford, the loan institution offered to extend her repayment period. The latter she expressed is a benefit only to the bank.

“Extending the time frame for payback is not ideal for mortgagors. The only people that benefit are the loan institutions because the longer you take to pay them back, the more they collect,” she declared. “Still, given the number of increases, that was the option we were left with.”

Research by Observer Online indicates that interest rates from DTIs have jumped from 6.95 per cent to 9.25 per cent over the last two years. The increases mean that mortgagors have been dishing out an additional tens of thousands of dollars monthly.

Another distressed homeowner, Racquel Jackson* argued that something needs to be done to hold loan institutions accountable. She reasoned that the process of owning one’s dream home is already too tedious for persons to be faced with potential debt and foreclosure as a result of constant mortgage increases.

“The level of transparency during the home ownership process is frustrating. If you don’t know what you’re doing or you don’t have advisors or a good realtor who knows the market, you easily get ruined,” she said. “And that is just heartbreaking because it’s a tough market. On top of that, imagine closing on your property, budgeting for your monthly mortgage, then having it increase year after year. That’s even more daunting.”

Jackson, who bought her home six years ago, shared that when she began repayments, her mortgage was just over $70,000 per month. Today, she is repaying $116,000 monthly, a whopping 66 per cent increase.

“In the same year we started repaying, it jumped to more than $80,000 and that’s when my problems started. When that happened, I called and asked for visibility on what was happening and we got the run around. Getting information was so difficult,” she explained. “And that’s not even the worst part, it’s not as if you get notice of these increases. How I found out my mortgage had increased was when I realised they started taking more than they would usually take. So my mortgage was over $70,000 and I would pay like $100,000. I noticed based on my payments that something was off with the numbers and then I received a text message that my mortgage was in arrears. That’s when I was informed of the increase and then the emails came.”

Joseph Brown* said he was shocked when his JN mortgage payments jumped by nearly $30,000, from $237,000 to $265,000, within a matter of days last July.

“I received a letter on July 8 that, due to an increase in peril insurance rates, my mortgage payment would increase to $246,000. Five days later I get another letter that my payment will be increased to $265,000 because of an adjustment in my interest rate,” Brown said, adding “I didn’t see the second letter so my account went into arrears and I was alerted by the bank. And then I was in denial for months because I thought it must have been a mistake.”

All three homeowners told Observer Online that they are hoping for some reprieve as they urge the government to look into possibly capping the number of increases DTIs are allowed in a given period.

“There needs to be more transparency and better regulations in the market. You should not be able to throw this significant amount of interest rate behind someone’s mortgage without any conversation with the consumers. At the very least we deserve that. Then, I would appreciate it if the government would cap rates or cap the number of increases these loan institutions are allowed per year or every two year,” Jackson said. “Taxi man, bus man, the rent board, JPS everyone has to apply for increases. I want the government to say banks should apply for increases as well. We need something that looks out for the consumers.”

*Names changed per request