The switching game - Mortgage lenders ramp up sales campaigns
Mortgage rates are trending down, which means lower interest income, and banks are getting more aggressive at going after new business with the introduction of a teaser rate that rewards mortgagors for switching lenders.
As the mortgage market adjusts to a new interest rate environment, long-standing mortgagors are turning out to be the winners, with many seeing thousands of dollars shaved off their monthly payments.
A canvass by the Financial Gleaner indicates that those who are knowledgeable about current market conditions are requesting better rates from their banks.
Within that environment, some lenders have added a 'switch' rate, aimed at mortgagors who are seeking a better deal.
Among the borrowers canvassed, one older mortgage holder who purchased property in 2015 claimed to have received three rate cuts since then.
Among the mortgage lenders canvassed by the Financial Gleaner, both Scotiabank and JN Bank said internal data indicate that their borrowers have been paying less on average on their loans.
JN Bank said that since February 2016, it has twice reduced mortgage rates from 9.29 per cent to 8.5 per cent rates now applicable to home purchase, construction, refinance, home improvement and home equity loan products.
“Our primary members, who are those mortgagees who maintain JN Bank as their main commercial banking institution, benefit from a 25-50 basis point preferred rate,” the bank said.
The average savings from those reductions, based on a $20-million mortgage and average term of 20 years, was $12,764.41 monthly, JN Bank said.
Scotiabank said since 2016 to present time, it has cut rates from 10.75 per cent to 9.25 per cent, and has been offering a special rate of 7.99 per cent. It’s ‘switch rate’ is also 7.99 per cent.
“Since mortgages are long-term assets, with the greatest opportunity of increasing customers’ net worth over time, Scotia Group decided to offer a significant reduction in the interest rate payable by customers in 2016 with the ‘switch mortgage campaign’ which offered an attractive cash back of two per cent to customers to cover the cost of transferring their mortgages to Scotia Jamaica Building Society. Since then, the low rate of 7.99 per cent has been maintained.”
The banking group said that a $20- million mortgage for a term of 25 years would, for example, result in a decrease in monthly mortgage payments from $187,077 to $152,515 “an over 18 per cent reduction”.
First Global Bank, a new entrant to the mortgage market, launched in 2017 with an introductory ‘market-leading’ rate of 8.25 per cent, but has since returned to its ‘normal rate’ of 8.5 per cent, said bank president, Mariame McIntosh Robinson.
National Commercial Bank Jamaica, which entered the residential mortgage market in 2012, says it is currently running a ‘switch’ campaign, but did not share the rates on offer. The campaign, which concludes May 31, promises fixed payments for three years and reduced fees.