Mortgage Rates in Jamaica
How Have Mortgage Rates Been Changing Over Time?
Interest rates have been on the decline in Jamaica, as a result of the government putting several policies in place to make it cheaper for consumers to borrow, particularly when it comes to home ownership. A few of these initiatives include:
– lowering the policy rate by 350 basis points (3.5%) in 2 years
– lowering stamp duty and transfer tax (see article here)
– lowering NHT rates and
– increasing the amount that individuals can borrow from the NHT
These initiatives, in addition to fierce competition in the mortgage sector, have sparked a race to the bottom among lenders to give consumers the best rates to buy a home. The graph below, extracted from information by the Bank of Jamaica, shows the average mortgage rates vs the average policy rates over the past 2 years.
* Projected Rate for Mortgages. Note that the exact month of the policy rate change is the date closest to the quarter indicated
Source: Bank of Jamaica – http://boj.org.jm/publications/publications_show.php?publication_id=20 and http://boj.org.jm/announcements/asearch.php?sel_sub=20
As you can see both have been trending downward over the past two years. As the government lowers its policy rates, it is expected that the banks will lower their lending rates to reflect the fact that they receive a lower rate on funds on deposit, which should spark banks to lend more, at a lower rate. For variable-rate mortgages, the rate for your loan typically goes down if the lending institution (bank) reduces its interest rate, however if the Bank of Jamaica increases its policy rate, the rates of loans will also go up. Check my article here on why interest rates matter in taking a mortgage.
In historical statistics published by the BOJ, the weighted average of mortgage rates at commercial banks in June 1994 was 36.42% (this did not include Building Societies who offered much lower rates) and by June 2006 the rate was 25.26%. The BOJ reported in 2007 that the weighted average mortgage loan rate of building societies was 12.87% coming down from 13.88% in 2006. The Building Societies were an obvious choice for mortgages a decade ago because their rate was much lower than commercial banks! Now it’s a level playing field with Banks and Building Societies competing alike with rates. Additionally, the largest Building Society in Jamaica (Jamaica National) converted to a Bank in 2017 and offered the same competitive rates.
So rates have steadily been declining in the general market, but remember the National Housing Trust (NHT) Rate has historically been much lower than existing market rates. Check my article here on using the NHT to buy a home and learn more about Accessing a Mortgage and Calculating Your Mortgage Costs in your journey to home ownership.