Jamaica Homes Monthly Mortgage & Housing Finance Review — October 2024

Publication date: 5 November 2024 | Covering: October 2024

Monthly Briefing

• BOJ cuts overnight rate to 6.50 per cent effective October 1; second 2024 reduction
• US Federal Reserve’s landmark 50 basis point September 18 cut ends the historic tightening era
• Jamaica headline inflation within 4.0–6.0 per cent target for second consecutive month
• Commercial mortgage market begins gradual repricing; variable rate borrowers see first relief
• NHT J$7.5 million limits steady; application volumes elevated as affordability improves marginally
• November BOJ meeting approaching; third cut of 2024 widely anticipated

BOJ’s Second Cut: 6.50 Per Cent From October 1

Following its September 2024 meeting, the Bank of Jamaica’s Monetary Policy Committee announced that it would reduce the overnight policy rate by a further 25 basis points, from 6.75 per cent to 6.50 per cent per annum, with effect from 1 October. This was the second reduction of the current easing cycle, following the inaugural 25 basis point cut to 6.75 per cent that took effect on 21 August. Together, the two cuts have now reduced the policy rate by 50 basis points from the 7.00 per cent peak that was maintained from November 2022 through July 2024. The BOJ’s press release cited continued progress in bringing inflation within the 4.0 to 6.0 per cent target range, a stable external account, and international reserves at comfortable levels as the principal justifications.

With the October cut now implemented, market attention is turning to the BOJ’s November meeting. Given the sustained within-target inflation performance and the deliberate pace of the easing cycle, a third consecutive 25 basis point reduction in November is considered likely. The BOJ has signalled that the pace of future adjustments remains data-dependent, and no pre-commitment to any specific rate path has been made. The growing body of on-target inflation readings, however, provides the Committee with the confidence to continue its measured easing.

For Jamaica’s commercial mortgage market, the two cuts delivered to date — 50 basis points in aggregate — have begun to work through the banking system. Variable rate mortgage contracts referencing the BOJ policy rate have adjusted downward, and some deposit-taking institutions have begun to offer improved fixed-rate products. The typical commercial mortgage range remains approximately 8 to 12 per cent, but the lower end of that band has become more accessible to qualifying borrowers with strong credit profiles and significant down payments. The full benefit of the easing cycle — which may ultimately total 150 to 200 basis points before the BOJ pauses — will take time to appear fully in end-borrower pricing.

The Fed’s Landmark September Cut: A Global Pivot

The US Federal Reserve’s decision to reduce the federal funds rate by 50 basis points — the largest single cut since the emergency reductions of March 2020 — on 18 September 2024 marked a decisive turning point in the global monetary cycle. The move brought the federal funds target range from 5.25–5.50 per cent, where it had been since July 2023, to 4.75–5.00 per cent. Fed Chair Jerome Powell described the decision as a “recalibration” rather than a response to economic weakness, emphasising that the US economy was performing well and that the cut reflected progress on inflation, not a reaction to deteriorating conditions. Markets interpreted the statement broadly positively.

For Jamaica, the Fed’s pivot is significant for several reasons. It narrows the interest rate differential between the United States and Jamaica, reducing the pressure on the Jamaican dollar from investors seeking higher-yielding US dollar assets. It signals the beginning of a global easing cycle that tends to improve capital flows to emerging and developing economies. And it correlates historically with improved growth conditions in the United States, which matters enormously for the Jamaican diaspora’s employment levels and, consequently, for remittance inflows. The October data shows the Jamaican dollar maintaining its stability, suggesting the exchange rate has absorbed the Fed’s pivot without disruption.

Inflation: Two Months in the Target Range

Jamaica’s headline inflation has now been within the BOJ’s 4.0 to 6.0 per cent target range for two consecutive months. September 2024 was the first month in range after an extended period of above-target readings; October has confirmed the continuation of this pattern. The BOJ’s September meeting cited this return to target as the central justification for the rate cut, and the October performance reinforces that the move was calibrated appropriately. The monthly CPI change for October is modest, reflecting the seasonal pattern of the period and the ongoing moderation of global commodity prices.

The extended period of above-target inflation — driven by the global commodity shocks of 2021 and 2022, the supply chain disruptions that followed, and Jamaica’s particular vulnerability to imported price pressures through its energy and food imports — has been a significant burden on Jamaican households. The erosion of real wages during this period compressed household balance sheets and in some cases reduced the ability to save for mortgage deposits. With inflation now returning to the target range, real wage growth is possible again for the first time since the cycle began, providing some basis for improved household financial health over time.

NHT and Affordable Housing Finance

The National Housing Trust’s loan limits — J$7.5 million for individual open market purchasers, J$10 million for build-on-own-land — have not changed through 2024. The SMART Energy loan, introduced in 2024 for the financing of residential solar and energy conservation installations, is capped at J$1.5 million. NHT interest rates remain in the 0 to 5 per cent income-banded structure effective since July 2023: 0 per cent for the lowest earners, 2 per cent for the next band, 4 per cent for mid-range earners, and 5 per cent for contributors earning above J$100,000 per week.

Application volumes for NHT mortgage products have remained elevated through 2024, reflecting both the demand side of Jamaica’s chronic housing deficit and the rational preference of eligible contributors for NHT finance over commercial alternatives. The gap between NHT rates (0–5 per cent) and commercial mortgage rates (8–12 per cent) remains the most compelling financial argument for prioritising NHT access. The Trust’s pipeline of more than 41,000 housing solutions under various stages of development continues to be the most significant source of new affordable supply in the Jamaican market.

The Property Market: Autumn Activity

October typically sees a pickup in Jamaica’s property market activity as the humidity of the summer months eases and the hurricane season — which runs through the end of November — moves past its statistical peak. Buyers who deferred decisions during the height of the season return to viewings and valuations, and developers who held back major launches in August and September begin to release new phases and pricing. The 2024 autumn market has been characterised by steady, if not spectacular, transaction volumes across the affordable-to-mid price range.

In the upper and diaspora segments, the combination of improving global financial conditions and the approaching Jamaican holiday season is drawing overseas buyers back to the market. Coastal properties in St. Ann, Trelawny, and Westmoreland, and the established suburban communities of Kingston’s hills, continue to attract interest from returning residents and diaspora purchasers with accumulated overseas savings. For this segment, the modest easing in commercial mortgage rates makes leveraged purchases more attractive than they were at the peak of the tightening cycle.

Looking Ahead

The BOJ’s November meeting is the most immediate event of interest for Jamaica’s mortgage market. A third consecutive 25 basis point reduction, if delivered as expected, would bring the policy rate to 6.25 per cent and extend the beneficial effect on variable rate mortgage products. The US Federal Reserve’s November 7 meeting — expected to deliver a further 25 basis point cut — will provide additional context for the global easing environment. If both cuts materialise, the closing of 2024 will have seen Jamaica’s mortgage market enter the most accommodative rate environment in several years.

For the NHT, the signal that loan limit discussions are a live policy topic will be watched closely. A formal announcement of higher limits — expected in 2025 but possibly signalled earlier — would immediately stimulate activity at the affordable end of the market. The supply challenge remains the most persistent structural issue: financing improvements, however welcome, cannot substitute for the construction of adequate housing at accessible price points across Jamaica’s urban and peri-urban communities.

---

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.

Follow Jamaica Homes on Youtube @jamaicahomes and Instagram @jamaica_homes and on Facebook @jamaicahomes Send us a message or email us at onlinefeedback@jamaica-homes.com or editor@jamaica-homes.com