Jamaica Homes Monthly Mortgage & Housing Finance Review — May 2025

Publication date: 5 June 2025 | Covering: May 2025

Monthly Briefing

• BOJ cuts policy rate 25 basis points to 5.75 per cent on May 21, fifth reduction since August 2024
• Inflation within BOJ’s 4.0–6.0 per cent target range since September 2024 justifies easing
• NHT loan limits to J$9 million per individual applicant coming into effect June 16
• NHT income-based mortgage rates from 0 to 5 per cent to launch July 1, 2025
• US Federal Reserve holds 4.25–4.50 per cent; cautious data-dependent stance maintained
• SMART Energy loan to rise from J$1.5 million to J$2.5 million as solar demand surges

BOJ Cuts to 5.75 Per Cent: The Fifth Step in a Year of Easing

The Bank of Jamaica’s Monetary Policy Committee took its fifth and most recent easing action on 21 May 2025, reducing the overnight policy rate by 25 basis points from 6.00 per cent to 5.75 per cent per annum. The unanimous decision was the logical extension of an easing cycle that began in August 2024 — when the BOJ made its first downward adjustment after holding rates at the peak 7.00 per cent for nearly two years — and reflects the Committee’s assessment that Jamaica’s inflation environment has normalised sufficiently to permit continued policy accommodation. From the 7.00 per cent peak to the current 5.75 per cent, the BOJ has reduced its policy rate by 125 basis points over the course of nine months.

The May press release cited the key rationale: headline inflation has been tracking within the Bank’s 4.0 to 6.0 per cent target range since September 2024, demonstrating a sustained and durable normalisation of price pressures after the elevated inflation of 2022 and 2023. Core inflation — which provides a cleaner read of underlying domestic price pressures — has also been consistent with the target, reinforcing confidence that the disinflation is genuine rather than driven purely by favourable base effects. The BOJ projected that headline inflation would continue to track within the target range over the medium term, providing a foundation for a continued, though gradual, easing of monetary conditions.

For Jamaica’s mortgage borrowers, the 5.75 per cent policy rate marks a meaningful milestone. Commercial bank mortgage rates, which had risen alongside the BOJ’s hiking cycle in 2022 and 2023, are now on a gentle downward trajectory. Variable rate borrowers are beginning to see the benefit in their monthly repayment schedules, and fixed-rate customers coming up for renewal are finding more attractive terms than were available twelve months ago. The market range for commercial mortgage finance remains approximately 7 to 12 per cent, but the lower end of that range has become more accessible to qualifying borrowers as competitive pressure and lower funding costs interact.

Ahead of the NHT’s June and July Reforms

June and July 2025 are shaping up to be among the most significant months in the National Housing Trust’s recent history. With effect from 16 June 2025 — eleven days after this publication’s release — the NHT will raise its individual open market loan limit from J$7.5 million to J$9 million, and its build-on-own-land ceiling from J$10 million to J$11 million. Two co-applicants will be able to access up to J$17 million, and three co-applicants up to J$23 million. The changes, announced earlier in 2025 by Prime Minister Andrew Holness, are the product of sustained advocacy from housing sector stakeholders who argued that the 2023 limits had been eroded by property price inflation and construction cost increases.

From 1 July 2025, the NHT will replace the existing income-banded rate structure with a more granular income-based system that scales from 0 per cent for the lowest earners to 5 per cent for the highest-income band. Under the previous structure — introduced in July 2023 — those earning above J$100,000 per week paid 5 per cent, while lower bands paid 0, 2, or 4 per cent. The new system refines and extends this approach, ensuring that the 0 per cent rate is targeted at the contributors who most need it. The NHT has also signalled that its service charge for new mortgagors will be reduced from 1 July, lowering the upfront cost of taking on an NHT mortgage.

The SMART Energy loan, which allows contributors to finance renewable energy and water conservation installations, will also be increased from J$1.5 million to J$2.5 million. This 67 per cent increase reflects both rising installation costs and the Trust’s recognition that energy self-sufficiency has become a priority for an increasing share of its contributor base. With electricity prices remaining elevated, a solar installation financed at NHT mortgage rates provides a compelling return for those who qualify.

Inflation Within Range: What This Means for Borrowers

The BOJ’s confirmation that inflation has been tracking within the 4.0 to 6.0 per cent target range since September 2024 provides a stable backdrop for housing market activity. For borrowers, a return to moderate, predictable inflation is preferable to the elevated readings of 2022 and 2023, which eroded real wages and purchasing power at a time when both mortgage costs and property prices were rising. The combination of declining inflation and lower policy rates — even if commercial mortgage rates have not fallen commensurately — represents an improvement in the real cost of borrowing.

The primary beneficiaries of the current environment are NHT contributors: their mortgage rates are set at origination based on income, not the BOJ policy rate, so they do not benefit directly from policy rate cuts in the way commercial mortgage customers do. However, the broader macroeconomic stabilisation that underpins the BOJ’s easing — lower inflation, stable exchange rates, improved government finances — creates the conditions in which construction activity can expand and housing supply can grow, potentially moderating property price inflation over time.

Exchange Rate and Remittances: Stable Heading into Summer

The Jamaican dollar exchange rate has remained broadly stable through May 2025, with the BOJ continuing its practice of active foreign exchange market management. The 2025 tourist season has been performing well, providing a natural source of US dollar inflows, and remittances — tracking above the US$3.36 billion that was received in 2024 — have supplemented the foreign exchange supply. The combination has allowed the BOJ to maintain a comfortable reserve position while keeping the exchange rate from weakening materially.

For the housing market, a stable exchange rate matters most through the cost of building materials. Jamaica imports a significant proportion of its construction inputs — cement, steel, electrical materials, roofing, and fixtures — and the Jamaican dollar price of these inputs is directly influenced by the exchange rate. A period of currency stability, as is currently being experienced, helps developers and self-builders manage construction budgets with greater confidence. It also reduces the inflationary pass-through that had been a recurring challenge during earlier periods of exchange rate depreciation.

The US Federal Reserve: Patient on Hold

The Federal Reserve’s May 2025 meeting produced no change in the federal funds rate, which remains at 4.25 to 4.50 per cent — the level established by the three consecutive 25 basis point cuts in October, November, and December 2024. Fed Chair Jerome Powell emphasised patience, noting that US inflation — while trending in the right direction — had not yet reached the 2 per cent target on a sustained basis. With the US labour market continuing to add jobs at a reasonable pace, the Fed saw no urgency to ease further in the near term.

For Jamaica, the Fed’s extended hold has been broadly neutral. The differential between US and Jamaican interest rates remains supportive of the Jamaican dollar, and the relative stability of the US economy has maintained the employment levels of the Jamaican diaspora whose remittances are critical to Jamaica’s balance of payments. A resumption of Fed easing later in 2025 — which markets still anticipate, albeit with diminished conviction — would provide additional tailwinds for the Caribbean region.

Looking Ahead

The month of June 2025 promises to be eventful for Jamaica’s housing finance market. The NHT’s loan limit increases on 16 June will immediately expand the pool of eligible properties for individual NHT contributors, and the July 1 income-based rate reform will further enhance the value proposition for lower-income applicants. Together, these changes represent the most significant single-period enhancement of the NHT’s product offering in years, and the market will be watching closely to see whether the demand they stimulate can be met by an adequate supply of appropriately priced housing.

The BOJ’s next meeting, scheduled for late June, will assess whether the May rate cut has had the desired effect and whether further easing is warranted. With the inflation data continuing to look benign, the door to a further reduction later in 2025 remains open, though the pace will be determined by incoming data. For mortgage borrowers, the medium-term direction of the rate cycle remains a gentle downward slope — welcome news for those who have endured elevated borrowing costs through the post-pandemic tightening period.

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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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