Dionne Rose, Business Reporter

Left: Leesa Kow, a marketing executive at Jamaica National Building Society, says mortgage rates are influenced by local and international conditions. Right: Gavin Lowe, assistant vice- president of operations Victoria Mutual Building Society. Lowe says the central bank rate adjustment has forced an in-house review of mortgage rates. - File photos

Mortgage lenders, faced with the recent central bank hikes in interest rates by as much as 2.5 per cent within a month, believe the adjustments will spike the cost of credit.

But it is the uncertainty around the degree of the pass-through that has left them undecided about whether to reprice home loans this year.

"It has forced us to do a review on our rates," conceded Gavin Lowe, assistant vice-president for operations at the Victoria Mutual Building Society (VMBS), Jamaica's number two private mortgage provider.

"I am not saying that at this time that is what we are going to do, but in light of that, any prudent lender will be forced to review their rates in case they will have to move it up."

Scotia Jamaica Building Society (SJBS), a small player, indicated that it was also in watch mode.

"It is usually of concern when rates increase because it affects everybody but I really can't say at this point that we are expressing any major concerns," said Manager of Mortgage Services, Phillip Williams.

"We don't know whether it (BoJ rate increase) is long term or short term."

Jamaica National Building Society (JNBS), the market leader with a 47 per cent lock on mortgage loans according to the latest industry figures, was a lot less willing to signal how its rates would track this year, saying innocuously that mortgage rates are continuously reviewed based on market conditions.

"It is important to note that interest rates on mortgages are not solely determined by BoJ rates, but incorporate several other market and internal operational factors," said Leesa Kow, JNBS' acting executive - marketing, sales and promotions.

No higher than 12 per cent

Backed by cheap credit from the state housing agency, benchmark mortgage rates or the price at which a new homeowner can access loans hit a low of 12.99 per cent more than a year ago at a time when the central bank's rates to banks and its primary dealers were running no higher than 12 per cent.

But instability in the market linked to volatility in foreign exchange trading and ballooning inflation, have made the Bank of Jamaica more aggressive in its employment of tools to stabilise prices.

Now its signal rates, after Monday's increase, are set as high as 15 per cent, which essentially put the central bank's rates at one-half to two points higher than the cheapest mortgage rate on offer.

Lowe, speaking with the Financial Gleaner days before the second adjustment was announced, said that mortgage rates are unlikely to see any dramatic increases during the year, but said the BoJ's actions could have a ripple effect on the market.

"If that trend continues, it is going to force lenders now to start moving up their rates," he said.

"What it is going to mean is that persons who save with us are going to want a higher rate on their funds and in order to pay them, it means that we will have to charge a higher rate for new loans."

Deposit rates adjusted

Jamaica National has already adjusted deposit rates upwards on a dedicated segment of its accounts (see story on Page 2), but basically refused comment on whether that also meant it would offset that cost of paying out higher returns by increasing loan rates.

It too lends at a low of 12.99 per cent for residential mortgages, and 14 per cent for commercial real estate investments.

SJBS, the number three player in a market of four, is also likely to review its rates this year but, according to Williams, is more inclined to cut the price of its loans, now quoted at 13.5 per cent for loans of $3.5 million and upwards, and at 15.25 per cent for loans above $12.5 million.

"I don't expect to see any increase for this year," he said.

"If anything it might go down a little."

dionne.rose@gleanerjm.com