More rate hikes on the horizon

VMBS will increase the interest rate on its existing loan portfolio effective July 1, 2022.

LA 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 raise its benchmark rate amid rising l ‘inflation.

The 144-year-old mortgage lender, which had a loan portfolio of $73.85 billion in 2020, sent a statement to its members this week that it would raise the interest rate on its existing loan portfolio until a maximum of 1.50 percent which is expected to come into effect on July 1. The notice said this was in light of the BOJ’s actions over the past nine months, which saw its key rate increase tenfold from 0.50 to 5.00%.

The notice explained that the increase would result in upward adjustments to loan payments for existing variable loan customers and that those members would be contacted individually with any concerns they may have about the adjustments. VMBS had $64.11 billion in mortgages, with its audited financial statements revealing that its surplus and reserves would decline by $17.21 million and $927.14 million, respectively, if there were to be a 100 basis point (1.00%) increase in interest rates on Jamaica. assets and liabilities in dollars and foreign currencies.

VMBS plans to increase the interest rate on its existing portfolio to a maximum of 1.50%.

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

JN Bank Limited’s rate hike of 25 to 50 basis points is expected to take effect next week on Thursday. This will affect mortgages, auto loans and business loans for customers with variable rate loans. Sagicor Bank Jamaica Limited raises customer rates by 1.50% on June 27, while First Global Bank Limited raises customer rates on July 4. National Commercial Bank Jamaica Limited, the country’s largest bank by assets, had indicated it would raise rates on existing products last month, but did not send a mass notice to its customers notifying them of a specific rate increase.

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

The various announcements by different financial entities to raise rates have many borrowers scrambling to find out if their loans might be affected. Even real estate dealer Gabrielle Grant tweeted Twitter“Jamaican mortgage lenders are sending notices of interest rate increases for existing loans. The real estate market is watching eagerly.

Grant pointed out that throughout his nearly a decade of experience in the industry, the script for banks was that variable-rate loans could go up, but they traditionally didn’t increase existing loan rates. She pointed out that this is an inevitable consequence of rising inflation and that tradition is being pushed aside in these unprecedented times.

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

JMMB Group Limited’s interest/dividend payments on its $28.75 billion redeemable preferred stock portfolio increased 86% from $913.05 million in March 2021 to $1.69 billion in March 2022. This was influenced by the inclusion of $10 billion in newly issued preferred stock in 2021, but also the rise in 180-day Treasury yields for its floating rate preferred stock. The average yield was 1.52% in 2021 and reached 6.37% in 2022. Several other listed companies will be affected by the increase in the average yield of Treasury bills, as their interest charges will increase due to the revaluation of the interest rate. Even Community & Workers of Jamaica Co-Operative Credit Union Limited’s floating rate deferred shares, which were pegged at 7.35%, will reset at a higher rate than they were issued for in May 2018. The rate has was reset to 3.27% in June 2021 and is more than likely to reset above 10.25% this month based on May’s 180-day Treasury bill yield of 8.25% .

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