Jamaica Homes Monthly Mortgage & Housing Finance Review — June 2020

Publication date: 5 July 2020 | Covering: June 2020

Monthly Briefing

• Jamaica reopens international borders June 15; resilient corridor model; tourism volumes still minimal
• George Floyd death May 25; protests sweep United States through June; economic and social reckoning
• Fed June 9–10: holds 0.00–0.25%; projects rates near zero through 2022; economy “deeply scarred”
• US economy recovering from April trough; May and June job gains impressive; but 14 million still unemployed
• BOJ emergency low overnight rate; Jamaica CARE programme; NHT ceiling J$6.5 million; rates 0, 2, 4%
• Jamaica government extends support measures; tourism sector awaiting recovery; diaspora remittances resilient

Jamaica Reopens Its Borders

Jamaica took a significant step toward economic recovery on 15 June 2020, when the government reopened the island’s international airports to commercial tourism. The reopening was structured around a resilient corridor model, requiring international visitors to stay within designated resort areas and comply with COVID testing and health protocols, with random testing continuing during their stay. Visitors who wished to explore beyond the corridor could do so with additional screening. The framework allowed Jamaica to begin receiving tourists while managing the risk of imported COVID transmission. The decision was driven by economic necessity: the tourism sector accounts for a disproportionate share of GDP, employment, and foreign exchange earnings, and the complete closure of international tourism was inflicting severe and sustained damage on the economy.

The practical volumes of international arrivals in June 2020 were, however, a fraction of pre-pandemic levels. Airline capacity had been massively reduced, travel hesitancy remained high among potential visitors, and several source markets maintained travel restrictions or advisories that limited departures. The reopening was a necessary beginning rather than a swift resolution of the tourism crisis. For the property market, the border reopening was nevertheless a positive signal: it demonstrated the government’s commitment to economic reopening, provided some marginal improvement in hotel sector activity, and supported the narrative that Jamaica was open for business and investment.

Federal Reserve June Meeting: Projecting Extended Zero Rates

The Federal Open Market Committee held the federal funds rate at 0.00 to 0.25 per cent at its June 9 to 10, 2020 meeting, maintained the full package of emergency monetary and financial stability measures deployed since March, and provided updated economic projections for the first time since the pandemic began. The Summary of Economic Projections showed the median FOMC participant projecting a federal funds rate at 0.00 to 0.25 per cent through the end of 2022, and all but two of seventeen participants projecting zero rates for the same period. The economic projections showed a severe 2020 contraction — the median projection was for GDP to fall 6.5 per cent — followed by a substantial but incomplete recovery in 2021. Chair Powell described the economic damage from the pandemic as “deep” and warned that significant uncertainty remained over the pace and completeness of recovery.

For Jamaica’s mortgage market, the June FOMC outcome — the most comprehensive US monetary policy communication since the pandemic began — provided clear and extended guidance that US rates would remain at zero for at least two and a half years. The global financial market implications of this guidance — abundant liquidity, compressed risk premiums, low long-term yields — create a backdrop that is supportive of Jamaica’s ability to access external financing and maintain competitive domestic lending conditions. The BOJ’s own pandemic-era low overnight rate is anchored by the global environment the Fed is maintaining.

US Economic Recovery and the Floyd Protests

The death of George Floyd at the hands of Minneapolis police on 25 May 2020 triggered the largest wave of civil unrest in the United States since the 1960s. Protests, predominantly peaceful, spread to all 50 states and to cities across the world through June 2020, focused on police brutality and structural racism. The protests occurred amid an already difficult economic environment, with the US still processing a sudden unemployment shock of historic severity. The intersection of pandemic, economic crisis, and social unrest created an extraordinarily complex backdrop for economic policymakers and financial market participants. For Jamaica, the US protests had resonance as a diaspora community with deep ties to Black American social and political experience, though the direct economic implications were limited to the impact of social unrest on near-term US consumer confidence and urban economic activity.

Jamaica’s Mortgage Market: Emergency Footing

The Bank of Jamaica’s overnight policy rate remained at its pandemic-era emergency low through June 2020. The BOJ had implemented a package of monetary and prudential measures at the onset of the pandemic, including rate reductions, liquidity facilities, and regulatory accommodations to support continued lending. The NHT remained active, with its J$6.5 million individual loan ceiling and subsidised rates of 0, 2, and 4 per cent providing the primary vehicle for affordable housing finance. The government’s CARE programme provided income support to household in the most affected sectors, partially sustaining the capacity of some potential homebuyers to service existing commitments and plan for future purchases. Remittance inflows, remarkably resilient in the face of the global pandemic, continued to support Jamaican household finances.

Looking Ahead

The trajectory of the US COVID summer situation — particularly in southern and western states that had reopened early — will be a key determinant of Jamaica’s tourism recovery pace. The Federal Reserve’s July 28 to 29 meeting will provide the next monetary policy update. For Jamaica, the practical performance of the resilient corridor tourism model through July and August will be closely watched, as will any signals about the election timing. The BOJ’s next policy communications will reflect the evolving domestic and global economic environment.

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Mortgage & Housing Finance Disclaimer: This publication is for general information only and does not constitute mortgage, financial, legal or investment advice. Mortgage products, lending criteria, interest rates and borrowing costs vary between lenders and may change without notice. Readers should obtain independent advice from a qualified mortgage adviser, financial adviser or legal professional before making financial or property decisions.

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