THE Victoria Mutual Building Society (VMBS) has become the latest financial entity to raise interest rates on its existing loan portfolio as the Bank of Jamaica (BOJ) continues to increase its policy rate amid rising inflation.

The 144-year-old mortgage lender, which had a loan portfolio of $73.85 billion in 2020, sent out a release to its membership this week that it would be hiking the interest rate on its existing loan portfolio up to a maximum of 1.50 per cent which is set to take effect on July 1. The notice stated that this was in light of the BOJ’s actions over the last nine months which has seen its policy rate move tenfold from 0.50 to 5.00 per cent.

The notice explained that the increase would result in upward loan payment adjustments for existing variable loan customers and that these members would be contacted individually for any concerns they might have on the adjustments. VMBS had $64.11 billion in mortgage loans with its audited financials revealing that its surplus and reserves would decline by $17.21 million and $927.14 million, respectively, if there was supposed to be a 100 basis point (1.00 per cent) rise in the interest rates on Jamaican dollar and foreign currency assets and liabilities.

VMBS is one of two building societies in Jamaica with Scotia Jamaica Building Society being the other. No information has been seen on whether any credit unions have increased rates on their existing loan portfolio.

JN Bank Limited’s rate hike of 25 to 50 basis points is set to take effect next week Thursday. This will affect mortgages, auto loans and business loans for clients with variable rate loans. Sagicor Bank Jamaica Limited is raising rates on its clients by 1.50 per cent come June 27 while First Global Bank Limited is raising rates for its clients on July 4. National Commercial Bank Jamaica Limited, the country’s largest bank by assets, had indicated that it would be raising rates on existing products last month, but has not sent out a mass advisory to its clients informing them of any specific rate increase.

JMMB Bank Jamaica Limited, Bank of Nova Scotia Jamaica Limited (BNSJ) and FirstCaribbean International Bank (Jamaica) Limited have not announced rate hikes on their existing loan portfolios.

The various announcements by different financial entities of raising rates has sent many borrowers scrambling to find out if their loans might be affected. Even real estate dealer Gabrielle Grant tweeted on Twitter, “Jamaican mortgage lenders are sending out notices of interest rate increases for existing loans. The real estate market watches with bated breath.”

Grant pointed out that throughout her near decade of experience in the industry, the script from banks was that the variable rate loans could increase, but that they traditionally didn’t raise existing loan rates. She highlighted that this was an inevitable consequence of rising inflation, and that tradition is out of the window in these unprecedented times.

Average mortgage rates have declined from 10.79 per cent in March 2012 to 6.96 per cent in March 2022. Mortgage rates were 25.20 per cent at the start of the millennium and peaked at 30.60 per cent in August 2000. The average rate declined from 25.57 per cent in October 2006 to 13.93 per cent in November 2006.

JMMB Group Limited’s interest/dividend payments on its $28.75 billion redeemable preference share portfolio moved up by 86 per cent from $913.05 million in March 2021 to $1.69 billion in March 2022. This has been influenced by the inclusion of $10 billion in newly issued preference shares in 2021, but also the rising yields on the 180-day treasury bills for its variable rate preference shares. The average yield was 1.52 per cent in 2021 and hit 6.37 per cent in 2022. Several other listed companies will be impacted by the rise in the average yield on treasury bills as their interest expense cost rises from the revaluing of the interest rate. Even Community & Workers of Jamaica Co-Operative Credit Union Limited’s variable rate deferred shares which were set at 7.35 per cent will reset to a rate above what it was issued for in May 2018. The rate was reset to 3.27 per cent in June 2021 and is more than likely to be reset above 10.25 per cent this month based on the May’s 180 day treasury bill yield of 8.25 per cent.