More Bahamians committed to residential mortgages for new homes in the first three quarters of the year, compared to the same period in 2018 – which may be due to a congruent decrease in interest rates, according to data released by the Central Bank of The Bahamas (CBOB).
The data, compiled in the CBOB’s Quarterly Statistical Digest for November 2019, shows that there were 758 mortgage commitments in the first three quarters of the year – 646 for single dwelling homes and 112 for duplex and row homes. This is compared to the 701 residential mortgage commitments made in the first three quarters of 2018.
This comes as average interest rates for mortgages across domestic banks and insurance companies have steadily declined over the past few years.
The average interest rate for residential mortgages was 7 percent in the third quarter of 2019, down from the average of 7.2 percent in the third quarter of 2018.
While the second quarter of 2019 saw average interest rates at 6.8 percent, the overall decline in the past year still remains lower than the peak rates experienced over the past five years, which reached as high 8 percent.
On average, Bahamians were paying $1,706 monthly for their mortgages during the third quarter of 2019, compared to the $1,823 they were paying a year prior.
There were much fewer commercial mortgage commitments made through to the third quarter of 2019, which totaled 10.
The average interest rate for commercial mortgages was 7.8 percent in the third quarter of the year.
“With regard to interest rate developments, banks’ weighted average loan rate fell by 1.1 percentage points to 11.67 percent. Likewise, the weighted average deposit rate declined by 21 basis points to 0.40 percent, with the highest rate of 4 percent offered on fixed balances of over 12 months,” the central bank said in its recently released Monthly Economic and Financial Developments (MEFD) report for October 2019.
These figures also come as banking sector arrears continued to trend downward during October, the MEFD notes, with total private sector arrears contracting by $50.8 million (6.8 percent) to $698.9 million and the corresponding ratio declining to 12.3 percent of total private sector loans.
“In particular, short term arrears (31-90 days) reduced by $44.1 million (16.3 percent) to $227.1 million and its relevant ratio fell by 79 basis points to 4 percent. In addition, non-performing loans (NPLs) contracted by $6.7 million (1.4 percent) to $471.8 million, yielding a 15-basis-points decrease in the attendant ratio to 8.3 percent. Disaggregated by loan category, the contraction in arrears was led by a $34.4 million (7.5 percent) fall-off in mortgage delinquencies to $422.2 million,” the report states.
“Both the short-term and long-term categories declined, by $27.0 million (18.0 percent) and $7.4 million (2.4 percent), respectively. Similarly, consumer loan arrears reduced, by $21.2 million (9.3 percent) to $206.1 million, owing to reductions of $20.7 million (20.0 percent) and $0.5 million (0.4 percent) in the short-term and long-term segments. In contrast, commercial arrears rose by $4.9 million (7.4 percent) to $70.6 million, due to a $3.6 million (22.3 percent) increase in short-term arrears and a $1.2 million (2.5 percent) uptick in non-accrual loans.”