Publication date: 5 November 2021 | Covering: October 2021
Monthly Briefing
- US Federal Reserve announces taper start on November 2 — two days ago; rate hikes still some way off
- Delta variant wave receding in major markets; global economic recovery regaining momentum
- BOJ overnight rate at low pandemic-era level; commercial mortgage conditions remain supportive
- NHT individual limit J$6.5 million; rates 0, 2, 4 per cent; contributor eligibility key asset
- Jamaica tourism: winter season bookings improving as travel confidence gradually rebuilds
- US inflation 5.4 per cent; supply chain disruptions sustaining above-target readings
Fed Taper Confirmed: Two Days Old at Publication
Just two days before this review is published, the US Federal Reserve’s Federal Open Market Committee announced the beginning of its asset purchase taper at its November 2 to 3 meeting, confirming the first step in the withdrawal of pandemic-era monetary accommodation. The FOMC announced reductions of US$15 billion per month in its asset purchase programme, beginning immediately, with the intention of concluding the taper by mid-2022. The federal funds rate was held at 0.00 to 0.25 per cent, and Chair Powell maintained that rate increases would not begin until after the taper was complete. The November meeting’s outcome — taper start confirmed, rate hikes deferred — broadly matched market expectations and did not produce a significant market reaction, suggesting that forward guidance had been effective in preparing investors for the transition.
For Jamaica, the Fed’s taper confirmation marks a meaningful milestone in the global monetary cycle. The extraordinary asset purchase programme — which saw the Fed buy US$120 billion of Treasury and mortgage-backed securities per month at its peak — was a primary driver of the ultra-low global interest rate environment that has made commercial mortgage borrowing unusually affordable across 2020 and 2021. As the taper proceeds and eventually concludes, the conditions that enabled near-zero US rates will progressively unwind. The timeline to the first US rate hike remains uncertain — Chair Powell emphasised that the taper and the rate decision are separate processes — but the direction of travel is unmistakeable.
Delta Wave Receding: Recovery Momentum Returns
October 2021 saw the global Delta variant wave continue to recede in most major economies. The United States, which experienced its Delta peak in early September 2021, had seen daily case counts decline significantly by October as a combination of vaccination, natural immunity from prior infection, and the variant’s own epidemiological dynamics reduced transmission. The United Kingdom — an important source market for Jamaica’s tourism — was managing a slower Delta wave but with high vaccination rates limiting severe illness and hospitalisation relative to the unvaccinated period. Canada, another key tourism source market, was similarly recovering from its Delta wave.
For Jamaica, the Delta wave’s retreat in source markets was positive news for the approaching winter high season. The tourism sector, which had seen recovery progress through the summer of 2021 interrupted by the Delta surge, was beginning to see booking confidence rebuild. Airlines serving the Jamaica route were restoring capacity, and the MICE (meetings, incentives, conferences, and exhibitions) sector was showing early signs of returning to the island. The employment and income implications for resort parish workers — and by extension for the property market in those parishes — are directly tied to the pace and robustness of this recovery.
BOJ and the Commercial Mortgage Market: Window Open but Narrowing
The Bank of Jamaica’s overnight policy rate remains at the historically low level established during the pandemic emergency. Commercial mortgage rates in Jamaica have been at or near their lowest levels in a generation, reflecting the BOJ’s accommodative stance and the broader global low-rate environment. Jamaica’s inflation has been rising above the BOJ’s 4.0 to 6.0 per cent target through 2021 — driven primarily by external supply chain disruptions and rising commodity prices rather than demand-pull pressures — and the central bank has been carefully monitoring the trajectory. The BOJ’s challenge is to distinguish between imported, supply-side inflation that monetary tightening cannot easily address and domestically generated inflation that restrictive rates can contain.
The approaching US taper and the implicit prospect of US rate hikes in 2022 will progressively constrain the BOJ’s room to maintain the current accommodative stance indefinitely. As US rates rise and the US dollar strengthens, Jamaica will face additional exchange rate pressure that may require the BOJ to raise its own rates sooner than pure domestic inflation considerations alone would suggest. The interplay between domestic inflation, exchange rate management, and global monetary conditions will be the dominant theme for Jamaica’s monetary policy in 2022.
NHT: Accessible Finance in a Recovering Market
The National Housing Trust’s mortgage framework continues to provide the most accessible housing finance in Jamaica. With commercial mortgage rates still favourable — but the window to those rates narrowing — the NHT’s subsidised products at 0, 2, and 4 per cent within a J$6.5 million individual ceiling represent the most cost-effective path to homeownership for eligible contributors. The Trust’s housing development programme, which had experienced some project timing disruption during the height of the pandemic, has been advancing through 2021 as construction activity has resumed and supply chains have partially normalised.
Looking Ahead
The US Federal Reserve’s December 14 to 15 meeting will next provide a major monetary policy signal, particularly regarding whether the Committee will accelerate the pace of the taper in response to elevated inflation. Any taper acceleration would pull forward the timeline to the first rate hike and sharpen the global monetary tightening signal for Jamaica and other open economies.
For Jamaica’s property market, the window of pandemic-era low commercial mortgage rates is identifiably finite. Buyers in an advanced state of readiness — with NHT eligibility confirmed, deposit savings in place, and property identified — have compelling reasons to move before the rate environment shifts. The structural demand for housing — driven by the 150,000-unit deficit and persistent household formation pressures — means that prices are unlikely to fall significantly even as rates rise, but the monthly affordability of a given purchase will deteriorate as commercial mortgage costs increase.
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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