Jamaica
News - Real Estate - Finance
Source: Jamaica Gleaner, Ashford Meikle, March 14, 2007)
Mortgage rate rivalry
heats up - Not a price war, says VMBS
Jamaica's two largest
mortgage providers are now neck to neck on rates, both looking to corner new
markets by offering 12.99 per cent 'sales' on home loans as new real estate
developments from Negril to Kingston enter the market.
Just over a week ago, Victoria Mutual Building
Society, headed by Richard Powell, announced it too would be offering a 12.99
per cent mortgage rate, to match a sale price that chief rival Jamaica National
implemented in 2006.
The offer included 100 per cent financing for
residential mortgages up to June 30 this year.
Almost immediately, Jamaica National, the
country's largest building society with a mortgage portfolio of just under $20
billion up to September 2006 according to Bank of Jamaica statistics, shot back
with a special mortgage window for women ? also offering 100 per cent financing
for the purchase or construction of residential properties at 12.99 per cent.
The Earl Jarrett-led JN, whose mortgage rates for
first time buyers was about 14 per cent prior to the sale, announced last Friday
that processing fees would be waived for successful applicants who would benefit
from free services within the JNBS group, including coverage of up to $200,000
if they insure the contents of their homes for a minimum of $1 million and have
peril insurance with NEM, a Jamaica National subsidiary.
Payment holidays
Describing the product as the first of its kind
in Jamaica, JNBS said that successful applicants would get two payment holidays
over the course of the mortgage, at the beginning and anytime thereafter during
the life of the loan.
Victoria Mutual, which describes its campaign
as a "customer-centric approach to mortgages," insists that it isn't
engaging in a price war.
"They are following what we are doing,"
VMBS' senior vice- president for group marketing, Michelle Wilson-Reynolds, told
Wednesday Business last week .
"Our concern is not only for first time
homeowners - it is extended to those who wish to purchase a second or third
home," Wilson-Reynolds added in a press release issued yesterday.
The new VP, who left Capital and Credit last year
to work with VMBS, said that Victoria Mutual's latest mortgage campaign was one
up on Jamaica National since it offers content insurance for up to five per cent
through its subsidiary Victoria Mutual Insurance Company and a 50 per cent
discount on valuations done by VM Property Services.
In addition, eligible borrowers will get one
year's free life insurance coverage up to $1 million.
Life of Jamaica also recently announced that it
would be reducing its mortgage rate from 14.5 per cent to 13.5 per cent, while
Scotiabank said last December that it would be establishing a $500 million
mortgage fund at a fixed rate of 11 per cent for five years for civil servants.
"In a competitive industry in which we
operate, each of us is trying to get our share of the market, would have to look
into what we are offering," said Gavin Lowe, vice president of operations
at VMBS.
Market share
"To be competitive, you price accordingly
to get a share of the market."
The building society had a loan portfolio of over
$14 billion to September 2006, according to central bank figures.
The first indication of the jockeying among
the building societies started early last year when FirstCaribbean International
Building Society (FCIBS) announced its intention to double its mortgage
portfolio which then stood at just under $2 billion
In fact, by October FCIBS - whose rate now stands
at 13 per cent and ? had surpassed Scotia Jamaica Building Society (SJBS) as in
third place of four building societies, recording a 70 per cent growth as it
portfolio climbed to just over $4 billion.
SJBS, which has the highest rate among the
building societies ? 17.5 per cent ? grew by just seven per cent in the year
during that period. VMBS registered an eleven per cent growth, while JN grew in
line with the industry, 23 per cent.
But, while the building societies compete among
themselves with innovative products, there are still limitations and
restrictions, as Wilson-Reynolds noted.
To access the special mortgage fund at SJBS,
the applicant has to be a university graduate and in the case of FCIBS a lump
sum deposit of $50,000 is required, which is hypothecated for three years, in
addition to compulsory saving of about three per cent of the monthly mortgage
payment.
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