Jamaica Homes Monthly Mortgage & Housing Finance Review — November 2024

Publication date: 5 December 2024 | Covering: November 2024

Monthly Briefing

• BOJ cuts overnight rate to 6.25 per cent on November 22; third reduction of 2024
• US Federal Reserve cuts to 4.50–4.75 per cent on November 7; easing cycle resumes
• Jamaica headline inflation within 4.0–6.0 per cent target for second successive month
• NHT J$7.5 million loan limits unchanged; 2025 reform discussion intensifying
• Commercial mortgage rates 8–12 per cent softening at the margin as BOJ cuts transmit
• Year-end property market activity driven by diaspora buyers and NHT applicants

Dual Easing: BOJ and the Fed Both Cut in November

November 2024 delivered a double measure of monetary easing for Jamaica’s mortgage market: the Bank of Jamaica reduced the overnight policy rate by 25 basis points to 6.25 per cent on 22 November, and the US Federal Reserve cut the federal funds rate by 25 basis points to 4.50–4.75 per cent on 7 November. The synchronicity of two major central bank rate reductions in the same calendar month — though for entirely different domestic reasons — provides a broadly supportive global monetary backdrop as 2024 draws to a close.

The BOJ’s November reduction was its third of the year, following the inaugural 25 basis point cut to 6.75 per cent in August and the second cut to 6.50 per cent with effect from 1 October. The cumulative easing of 75 basis points delivered to date in 2024 has brought the policy rate from the 7.00 per cent peak — maintained from November 2022 through July 2024 — to 6.25 per cent. The Bank’s press release following the November decision cited continued on-target inflation and a stable external position as the key justifications for the move. With the December meeting approaching, market observers expect a fourth and final 25 basis point cut before the year-end, which would bring the 2024 total to 100 basis points.

The Fed’s November 7 move — the second cut following the landmark 50 basis point reduction of 18 September — brought the federal funds rate to 4.50–4.75 per cent. The Federal Open Market Committee cited the continued moderation of US inflation and a softening labour market as the primary motivations. Fed Chair Jerome Powell noted that the pace of future easing would depend on incoming data, and markets are pricing a further 25 basis point cut at the December meeting. For Jamaica, the continued reduction in US short-term rates maintains a supportive external environment and reduces the opportunity cost of holding Jamaican dollar assets.

Inflation: Two Months Within the Target Range

Jamaica’s headline inflation has now tracked within the BOJ’s 4.0 to 6.0 per cent target range for two consecutive months — September and October 2024 — and the November reading, when published, is expected to confirm a third month of on-target performance. This represents a significant milestone: for two years, Jamaican inflation exceeded the upper limit of the target band, driven by the global commodity shocks of 2021 and 2022 and the supply chain disruptions that followed. The return to target is the culmination of the BOJ’s extended tightening cycle and provides the foundation for continued monetary easing through 2025.

For Jamaica’s mortgage market, the inflation outlook matters directly and indirectly. Directly, moderate inflation preserves the real purchasing power of fixed mortgage repayments and of savings accumulated for housing deposits. Indirectly, a return to on-target inflation is the necessary condition for the BOJ’s ongoing rate cuts — and it is those rate cuts, as they pass through the banking system, that will gradually reduce commercial mortgage rates over time. The precise pace and quantum of that transmission depends on the funding cost structures of individual lenders and the competitive dynamics of the Jamaican banking sector.

The Commercial Mortgage Market: Gradual Softening

Jamaica’s commercial banks and building societies have been repricing their mortgage products in line with the BOJ’s easing cycle, though the degree of pass-through remains uneven. By December 2024, the typical range for commercial mortgage finance — approximately 8 to 12 per cent — has begun to soften at its lower end, with some institutions offering rates in the high 7 to 8 per cent range to qualifying borrowers. Variable rate products benchmarked to the BOJ policy rate have adjusted mechanically as the policy rate has fallen, and fixed-rate products are being offered at more competitive terms than was available at the cycle peak.

The pattern of rate transmission in Jamaica is characterised by asymmetry: banks tend to pass on rate increases more quickly than reductions, and the stickiness of deposit rates — which represent the main funding cost for savings-funded lenders — means that the full benefit of a policy rate reduction may take six to twelve months to appear in mortgage pricing. With three 25 basis point cuts behind us and a fourth expected before year-end, the cumulative effect on commercial rates over the coming twelve months could be meaningful, particularly if the BOJ continues to ease into 2025.

NHT: Year-End Activity and 2025 Anticipation

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 remained unchanged through 2024. The SMART Energy loan ceiling of J$1.5 million has similarly stayed at the level set when the product was introduced. The approaching year-end has historically been a time of heightened NHT mortgage activity, as contributors who have accumulated sufficient benefit points and income documentation seek to secure approvals before the calendar rolls over.

Discussion of a potential NHT loan limit increase has been growing through the second half of 2024, driven by the recognition that property prices in Jamaica’s urban markets have continued to rise while the NHT’s lending ceiling has remained fixed in nominal terms. The gap between what the NHT can lend (J$7.5 million for individuals) and what many affordable urban properties now cost (J$8 to J$11 million) has widened, pushing an increasing proportion of buyers toward co-applicant arrangements or supplementary commercial finance. A limit increase to J$8.5 million or J$9 million in 2025 would partially close this gap and restore more of the NHT’s original purchasing power in the urban market.

Exchange Rate and Remittances: Year-End Strength

The Jamaican dollar exchange rate against the US dollar has maintained its characteristic managed stability through November 2024, with the BOJ continuing its active management of the foreign exchange market. The rate has remained broadly within the J$154 to J$159 range that has characterised much of 2024. December is seasonally the strongest month for US dollar inflows from remittances, as the diaspora increases its transfers ahead of Christmas and the new school term. The BOJ’s reserves position, having benefited from the sustained inflows of tourism and remittance revenues, provides an adequate buffer for managing any year-end volatility.

Full-year 2024 remittances are on track to approach or match the US$3.37 billion recorded in 2023, confirmed as another historically elevated year. The performance of remittances through 2024 has been broadly consistent with the trend of the previous several years — sustained flows driven by a large and economically active diaspora community, primarily in the United States, the United Kingdom, Canada, and the Cayman Islands. These flows continue to provide critical support to thousands of Jamaican households and are a major indirect driver of housing finance, both through direct deposit savings and through the stable foreign exchange supply that keeps the exchange rate and import costs manageable.

Looking Ahead

The BOJ’s December meeting — the last of 2024 — is the next key event. A fourth consecutive 25 basis point cut, widely anticipated by the market, would bring the policy rate to 6.00 per cent and the 2024 total easing to 100 basis points. The BOJ’s December Quarterly Monetary Policy Report will also be released, providing updated inflation projections and a forward-looking assessment of the economic outlook that will shape expectations for 2025’s policy path.

For Jamaica’s housing market, the closing of 2024 sets up an interesting 2025. A 100 basis point easing cycle, NHT product reforms that are widely anticipated, and improving global conditions create a more supportive backdrop than has been seen in several years. The challenge of supply — too few affordable homes being built to meet demand — remains as acute as ever. But with the financial conditions for demand improving, the pressure to resolve that supply constraint becomes more urgent, not less.

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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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