CIDB offers mortgages below current prime rate

(CMR) The Cayman Islands Development Bank (CIDB) has CI$15 million to lend to Caymanian mortgage seekers, offering qualifying borrowers interest rates as low as 3.75% for two years. This is significantly below the current prime rate.

The funds are available to buy or build a home, and for mortgage refinancing. The CIDB can lend each borrower up to CI$600,000 for up to a 30-year term. This offer was announced in the last meeting of Parliament and recently launched with an advertising campaign that has gained significant interest among prospective borrowers.

Deputy Premier and Minister for Finance & Economic Development Hon. Chris Saunders said, “In an environment of rising interest rates and increasing property costs, we are seeking ways to make borrowing more affordable for Caymanians. The two-year fixed rate is significantly better than current offerings at the local commercial banks, especially as we have seen the U.S. Federal Reserve raise the prime rate last month, with more hikes likely to come over the course of the year. We have found that rising interest rates have provided another barrier to local home ownership.”

He continued, “While we do not have the funds that the commercial banks have, we must do what we can with what we have. The situation for first-time Caymanian buyers was becoming increasingly difficult, and we had to find ways to encourage and facilitate Caymanian home ownership.”

The Deputy Premier noted that the Government's Strategic Policy Statement pledges to “provide solutions to improve the well-being of our people so they can achieve their full potential” as part of Broad Outcome Number 3 out of a list of ten such aims. He explained that part of this broad outcome is to “provide adequate and affordable housing in our communities.”

Deputy Premier Saunders outlined several initiatives to achieve this goal, including offering Government guaranteed home-assisted mortgages, providing quality, affordable housing, lowering the cost of borrowing through CIDB programs, and reducing stamp duty on land for Caymanians.

Minister with responsibility for Housing, Hon. Jay Ebanks welcomed the initiative by the CIDB and said, “These are undoubtedly challenging times, but it is in such times that we, as a Government, must rise to the challenge and empower our people to do the same. Homeownership is an integral aspect of a society's stability and affluence, and of building personal and family wealth.”

“Owning a piece of the Cayman rock is the foundation of the Caymanian dream. Too many of our people have felt locked out of that dream. This must, and will, change. I am looking forward to the smiles on the faces of our people – parents, grandparents, children – when instead of being locked out, they can turn the keys in the lock of their own front door,” Ebanks said.

CIDB Board Chairman Mark Scotland said, “The current focus is providing two-year term, fixed rates to assist Caymanian families that are contending with inflation and the possible threat of foreclosure. This fixed rate product provides a level of certainty and security in these inflationary times with rising interest rates affecting mortgage payments. Customers can sleep easy knowing they won't have to worry about rising interest rates over the next two years as their payments would be fixed.”

He explained the fixed-rate mortgage offer: “Within two weeks of launch, the bank already had $3 million in its pipeline under consideration, and this figure is expected to double over the coming weeks.

“The bank has utilized a tiered interest rate system to address risk and avoid a potential increase to its provisioning for bad debt. Financing is offered for up to 30 years to assist with lowering monthly payments. Unlike a commercial bank, the CIDB has the flexibility to extend these rates after the two-year fixed term as the bank's debt to its bondholders will be extinguished in three years,” he added.

Mr. Scotland continued, “The program is not only appealing to middle-income earners but higher income earners that see an opportunity to switch to free up cash for other investment opportunities. This has also had the effect of encouraging the commercial banks to offer some lower rates to retain customers so the migration to CIDB may slow down, but new mortgage growth will continue to increase for the bank.”

In addition to the fixed rate mortgage offer, Mr. Scotland noted that the CIDB also has a lending program for affordable homes to be constructed by the National Housing Development Trust (NHDT). This program offers 100 percent financing and a land loan scheme with interest rates based on the same tiered system as the current mortgage program.

In keeping with the Government's intention to remove barriers to Caymanian home ownership, Mr. Scotland said the mortgage sector would remain crucial to the CIDB in the next year.

He said, “The role of the CIDB is to support the economic growth and development of the country by making available financing primarily for housing, education, and business purposes. The CIDB has been doing this since its inception, and from the overall perspective, we will continue. With the various factors that are contributing to increasing housing costs for young Caymanian families, I see the role of the bank becoming much more important in facilitating access to housing in an affordable way. Adequate housing is a basic human right, and the CIDB sees its role in working with the Government to ensure this as an important one.”