The National Housing Trust, NHT, expects to onboard more partners, including credit unions, merchant banks and building societies, under the newly revised External Financing Mortgage Programme by August, when the long-standing Joint Financing Mortgage Programme, JFMP, comes to an end.
So far, it has inked deals with the top two banks, National Commercial Bank Jamaica and Scotiabank Jamaica, as well as large credit union COK Sodality to send more mortgage business their way, but on terms that ensure prospective homeowners get loans at interest rates and terms equivalent to benefits they would receive from NHT itself.
Mortgage loan rates at the commercial banks and other privately owned financial institutions hovers below eight per cent, on average; however, loan rates at the NHT are capped at 5.0 per cent.
To facilitate the partner’s lending at the state agency’s rates, the housing agency has built into the new financing model a ‘programme rate’, set at one percentage point above the BOJ’s policy rate or the partner’s interest rate, whichever is lower, it said.
Currently, the BOJ’s policy rate is at 7.0 per cent.
The NHT will then subsidise the loans disbursed by the financial partners, by paying directly to them the difference between the interest rate charged under the programme and the interest rate charged by NHT.
That’s expected to cost the housing agency $1.2 billion during the first year of the programme and is set to increase as the portfolio grows. It’s a cost the state agency says its willing to absorb when weighed against the potential benefits of the EFMP, but it’s still keeping tabs on the numbers since the programme excludes contributors who fall within the NHT’s zero per cent income band or those earning less than $30,000.99 weekly.
Those contributors as well as others requiring NHT subsidies, such as home grants, will still be required to have their applications processed at the 13 NHT branch offices and service centres nationwide.
But for other customers in higher-income bands, and therefore qualify for EFMP treatment, they will have access to an expanded list of mortgage institutions and more mortgage products, while the NHT will be able to “channel more resources into the construction of affordable housing solutions,” it said, in response to queries from the Financial Gleaner.
The programme rate set with the partners already onboarded was not disclosed, but the trust said the rate is jointly decided by itself and the financial partner, based on market factors, is standardised across all financial partners, and subject to periodic review.
It continues negotiations with the financial partners who are transitioning from the JFMP, as well as new potential partners.
“April to July has been a transitional period, but we do anticipate that come August 1 when the JFMP is no longer an option, we will gradually see more partner institutions coming on board.
“We expect all the commercial banks that were under JFMP to come under the programme, but we are looking particularly at credit unions, because they have continued to express interest over the years. Unfortunately, at the time they were not regulated by the Bank of Jamaica, but things have changed, and it means institutions under that auspices can participate under EFMP,” the NHT said.
Effectively, most contributors will be able to pop into almost any financial institution and access funding at the interest rates and terms as if they were to go directly to the NHT. Additionally, the option to access funding from the bank at their own interest rate on top of the NHT portion of the loan, which is up to $7.5 million per beneficiary, or $8.5 million in some cases, is still in place.
Still, the move is expected to stir up some competition across financial institutions, as they jostle for business from contributors. The state agency projects that some $25 billion in loans will be disbursed to consumers during the financial year 2024-25 by the current and prospective partnerships.
“It really will come down to who has the better mortgage package, inclusive of fees, insurance and so on, since all the partners will offer the loans at NHT rates,” the agency said via email.
Quicker service delivery
The EFMP is designed to meet the NHT’s goal of quicker service delivery. The agency’s online platform was recently improved towards that same goal.
While the EFMP doesn’t extend the widened network of mortgage financiers to low-income earners, the NHT contends that the income group is poised to benefit from the programme over time.
“Through this partnership, the NHT will be in a greater position to focus on its core mandate of providing affordable housing units to contributors, especially those at the affordable end of the market,” NHT Managing Director Martin Miller said in a press release.
The NHT currently has two main programmes that it collaborates on with private developers to increase the delivery of housing units and at a faster pace, particularly for low-income earners – the Guaranteed Purchase Programme and the Developers Programme.