Jamaica Homes Monthly Mortgage & Housing Finance Review — February 2024

Publication date: 5 March 2024 | Covering: February 2024

Monthly Briefing

• BOJ holds overnight rate at 7.00 per cent; February 2024 QMPR published; easing still ahead
• US Federal Reserve holds Jan 28–31; Chair Powell rules out March cut; June–September window intact
• Jamaica CPI still above 4–6 per cent target; deceleration trend continues but entry not yet achieved
• Commercial mortgage market unchanged at 8–12 per cent; NHT remains the dominant affordable path
• NHT J$7.5 million limit eight months in; demand pipeline strong ahead of anticipated rate relief
• Housing supply constraint persists; 150,000-unit deficit unchanged; NHT pipeline active

BOJ February QMPR: Holding the Line, Watching the Data

The Bank of Jamaica’s February 2024 Monetary Policy Committee meeting and the accompanying release of the Quarterly Monetary Policy Report have provided the most comprehensive recent statement of the Bank’s position and expectations. The QMPR confirmed the BOJ’s assessment that Jamaica’s headline inflation, while declining, remains above the 4.0 to 6.0 per cent target range. The Bank projected continued deceleration through 2024, with a return to the target range expected in the second half of the year under a central scenario that assumes no major external shocks. The policy rate was held at 7.00 per cent per annum, and the Bank reiterated its intention to maintain restrictive conditions until it has sufficient confidence that the inflation target will be met durably.

The February QMPR provided important context on several fronts. On the external account, the Bank noted that Jamaica’s net international reserves remained at a comfortable level, providing adequate buffer capacity. On the exchange rate, the Jamaican dollar has maintained its recent pattern of gradual and orderly adjustment within a corridor that the BOJ has been willing to defend through targeted interventions. On growth, the Jamaican economy has continued its post-pandemic recovery, with tourism, agriculture, and services sectors contributing to positive real GDP growth. The overall economic picture supports the case for maintaining tight monetary policy to bring inflation under control without precipitating a significant growth slowdown.

For Jamaica’s mortgage market, the February QMPR’s projections are most significant for the timeline they imply. If the BOJ’s own forecast of second-half 2024 target range entry is correct, the first rate cut could come at the June, August, or September meeting. Commercial mortgage borrowers can now plan with the understanding that the direction is clearly toward lower rates, even if the precise timing remains uncertain. Lenders who wish to lock in mortgage business ahead of the rate cycle are beginning to compete on terms for creditworthy customers, creating some opportunities for borrowers who engage proactively.

US Federal Reserve January Decision: March Cut Is Off the Table

The US Federal Reserve held the federal funds rate at the 5.25 to 5.50 per cent target range at its January 28 to 31 meeting, as expected. The significant development was Fed Chair Jerome Powell’s post-meeting press conference, in which he explicitly stated that a March rate cut was not likely. Powell noted that the Committee needed to see more evidence that inflation was sustainably moving toward the 2 per cent target before it would be comfortable beginning to ease. The January statement removed language that had previously described the Fed’s next move as likely to involve a rate increase, signalling that the next move would be a cut — but the timing was pushed out. Market pricing for a March cut, which had stood at around 70 per cent before the meeting, collapsed to below 20 per cent after Powell’s remarks.

The deferral of the first Fed cut to June or later extends the period of elevated US rates and its associated global effects. For Jamaica, the principal implications are exchange rate stability (the high US dollar attractiveness remains a pressure on the Jamaican dollar) and the cost of international capital. The BOJ’s own timeline for rate cuts is constrained by the need to maintain an adequate differential with US rates to discourage capital outflows. With the Fed now appearing unlikely to cut before June 2024, the BOJ has reduced flexibility to move before mid-year without risking exchange rate disruption.

Jamaica’s Inflation: Still Above Target, Still Declining

Jamaica’s headline inflation for January 2024 was published in mid-February, showing continued deceleration from the 7 to 8 per cent range that characterised much of the second half of 2023. The January reading placed point-to-point inflation in the upper-six to low-seven per cent range, still above the BOJ’s target ceiling but continuing the established downward trend. The February CPI data, to be published by STATIN in mid-March, will be the next data point. Analysts expect the February reading to show further deceleration as the high-base comparison months of early 2023 continue to support downward arithmetic pressure on the annual rate.

The inflation composition through early 2024 reflects the easing of the most acute phase of the global commodity price shock. Food prices, which had been a primary driver of Jamaica’s inflation at its peak, have moderated as global grain and vegetable oil markets have normalised. Energy prices — crude oil and refined petroleum products — remain at levels that are elevated relative to pre-pandemic norms but are not the acute upward pressure they were in 2022. The persistence of above-target inflation despite these moderating global factors reflects the structural cost pressures in Jamaica’s economy: imported energy dependence, constrained domestic agricultural production, and housing cost inflation that reflects the persistent supply-demand imbalance in the residential market.

NHT: Eight Months of the Expanded Framework

The National Housing Trust’s July 2023 product reforms — now eight months in operation — have become the established framework within which Jamaica’s affordable housing finance operates. The J$7.5 million individual loan limit, the four-tier interest rate structure from 0 to 5 per cent based on weekly income, and the multi-applicant ceilings of J$15 million and J$21 million are now the baseline against which market activity is measured. The Trust’s 2024 planning is understood to include continued development of its housing pipeline, the exploration of new product types, and engagement with the government’s broader housing policy agenda on questions of supply and affordability.

The competitive advantage of NHT finance over commercial alternatives has never been more quantitatively stark than at present. With commercial mortgage rates at 8 to 12 per cent and NHT rates at 0 to 5 per cent, the annual interest cost differential on a J$7.5 million loan is between J$225,000 and J$900,000 depending on the commercial rate and NHT band in question. Over the typical twenty to thirty year mortgage term, this compounds to a very large total cost difference that justifies almost any reasonable queue time or administrative burden for contributors who have access to NHT finance. The rational response of most Jamaican property buyers is to maximise their NHT entitlement before turning to commercial borrowing to supplement it.

The 2024 Housing Finance Outlook

With the BOJ’s February QMPR establishing a roadmap for inflation return to target in the second half of 2024 and the expectation of a corresponding first rate cut in the August to September window, the outline of 2024’s housing finance narrative is becoming clearer. The first half of the year will be characterised by continued elevation of commercial mortgage rates, sustained demand for NHT finance, and the gradual accumulation of pent-up buyer demand among those who can afford to wait. The second half may see the first rate relief for commercial mortgage borrowers in nearly two years, triggering a moderate increase in transaction activity and developer confidence.

The structural challenge remains unchanged. Rate relief can expand the pool of creditworthy borrowers and improve affordability at the margin, but it cannot substitute for the construction of new housing at accessible price points. The NHT’s pipeline of 41,000-plus units and the private sector’s continued development activity are the supply-side responses to Jamaica’s 150,000-unit deficit. Both require time, resources, and the sustained collaboration of government, the construction sector, and communities to deliver. The financing environment that 2024’s rate cycle may provide is necessary but not sufficient for the housing market’s long-run health.

Looking Ahead

The US Federal Reserve’s March 19 to 20 meeting will provide the next major global monetary signal, including updated economic projections. While a March cut has been ruled out, the meeting’s communications will shape expectations for June and beyond. For Jamaica, the BOJ’s next Monetary Policy Committee meeting — expected in April or May — will incorporate the February and March CPI data and will provide the next formal statement of the Bank’s view. If the inflation deceleration continues at its current pace, the BOJ may use that meeting to strengthen its forward guidance on the timing of the first cut, even if the actual reduction is reserved for the August meeting.

For participants in Jamaica’s housing market, the practical message of the February QMPR is clear: the peak of the rate cycle has passed, the direction is toward lower borrowing costs, and the timeline is measured in months rather than years. This is an environment in which preparation — pre-qualification, property identification, savings optimisation, and NHT eligibility confirmation — is genuinely valuable, as those who are ready to act when rates improve will be best placed to take advantage of the changing landscape.

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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.