Jamaica’s Mortgage Market Rebounds. Is It Enough?

Kingston, Jamaica — 15 August 2024

Jamaica’s mortgage market recorded a significant recovery in 2024. The Bank of Jamaica reported that 4,822 new mortgage accounts were opened in the commercial banking sector during the year, representing a 5.4 per cent increase in volume and a 12.8 per cent increase in value compared to 2023. The total value of new mortgage lending reached 82.9 billion Jamaican dollars. These are the strongest mortgage origination figures in several years, and they arrived despite a lending rate environment that remained elevated by historical standards, with commercial mortgage rates ranging between 7.5 and 8 per cent depending on the lender and the borrower profile. The story behind these numbers is more nuanced than the headline figures suggest, and it carries significant implications for the country’s housing outlook.

What Drove the Increase

The Bank of Jamaica attributed the mortgage growth partly to intensified marketing efforts by individual lenders, reflecting a competitive environment in which banks and building societies were actively seeking to grow their mortgage books. Competition in the mortgage market is generally beneficial for borrowers: it tends to produce better terms, more accessible products and improved service levels. The increased mortgage activity also reflected the gradual easing of inflation from its peak levels, which improved consumer confidence and reduced some of the affordability pressure that had dampened demand in 2022 and 2023.

The National Housing Trust’s contribution remained substantial. During the 2023 to 2024 financial year, the NHT granted 4,384 new mortgages valued at over 22 billion Jamaican dollars to its contributors. The Trust’s loan receivable portfolio stood at 278.8 billion dollars, representing a significant proportion of the overall mortgage market. When the commercial and NHT segments are combined, the total mortgage stock is estimated at approximately 24 per cent of GDP, a scale that reflects the central role of institutionalised housing finance in Jamaica’s economy.

Overseas Borrowers and the Currency Dimension

Approximately fifteen per cent of the commercial mortgage stock relates to overseas customers, the majority of whom are borrowing to purchase property in Jamaica. This diaspora dimension of mortgage lending reflects the sustained interest of overseas Jamaicans in maintaining property ties to the island, whether for retirement planning, family support, investment or short-term rental income. For lenders, overseas borrowers who earn in hard currency can represent lower credit risk than domestic borrowers of equivalent income, because their earnings are less exposed to domestic wage volatility.

For the market as a whole, the overseas component of mortgage lending contributes to the diversity and resilience of demand. In periods when domestic economic conditions are challenging, diaspora demand has tended to provide a floor under the market, particularly in the segments and geographies where overseas buyers are most active.

The Affordability Gap That Remains

The mortgage growth of 2024 is welcome, but it should not obscure the structural gap that persists. Lending rates of 7.5 to 8 per cent, while lower than the recent cycle peak, remain substantially higher than the rates available in major economies to which Jamaica is often compared for investment purposes. For a first-time buyer borrowing to the limit of their NHT entitlement or at the lower end of the commercial market, a rate in this range translates into a significant monthly commitment relative to typical wage levels in the Jamaican formal economy.

The Bank of Jamaica’s continued easing of its policy rate should, over time, translate into lower commercial mortgage rates. But the timeline of that transmission is not guaranteed, and lenders will manage their own cost of funds and margin requirements in determining how quickly and how far commercial mortgage rates follow the policy rate down. For borrowers, the practical advice remains: understand the total cost of a mortgage including insurance, fees and the long-run repayment burden, not just the headline interest rate, before committing to any loan.

What the Mortgage Market Needs Next

A healthy and growing mortgage market is a necessary condition for expanding homeownership in Jamaica. But it is not sufficient. The challenge is not only whether finance is available, but whether properties exist at price points accessible to the range of borrowers the market can serve. Expanding mortgage capacity without expanding housing supply at accessible price points simply channels more money into competition for a constrained stock, with predictable consequences for prices.

The mortgage market numbers for 2024 are a positive signal. They reflect a market that, after a difficult rate cycle, is finding its feet again. The sustained challenge is ensuring that the finance system and the housing supply system expand in tandem. One without the other is not enough.