(CMR) Premier of the Cayman Islands Wayne Panton has expressed disappointment that banks have collectively refused to consider delaying increasing interest rates in light of rate hikes by the US Federal Reserve. He shared on Friday morning's TCHT that he has been in communication with them for over a year now.
In an interesting political move, former speaker of the House McKeeva Bush and former Deputy Premier Chris Saunders issued a statement to another media house later on Friday claiming that they were going to bring a motion to Parliament to have banks reduce interest rates. From all accounts, this appears to be political postering, as Premier Panton confirmed that the Government actually has no power to force the banks to do anything.
Mr. Panton had written to the Cayman Islands Banking Association asking them to exercise discretion to slow down inflation, specifically to consider a 60-day implementation delay on interest rate increases.
In a statement issued to the media on Friday, Mr. Panton, who is also the Minister of Finance and Economic Development, said, ” While there is very little we can do locally as a Government to control the cost of food, fuel and other consumables, there are some areas in which we could have influence and rely on local discretion. One of these is the decision to increase local interest rates. Higher interest rates increase the price of borrowing and drive housing costs up by adding to property owners’ mortgage payments every month, which affects both homeowners and renters.”
He further stated that “While local banks have historically immediately increased interest rates in tandem with rate hikes by the US Federal Reserve (the Fed), which sets the “prime” or “base” interest rate for borrowing, there is no reason why this must be the case.”
He pointed out that Bermuda does not automatically increase interest rates when the US Federal Reserve rates increase.
Mr. Panton said that recognizing that the banks can use their discretion, he met and corresponded with the Cayman Islands Bankers Association twice over the past year to ask that the local retail banks implement delays in rate increases and other measures to mitigate the impact on homeowners and businesses.
When he met with the Association last year, only one bank agreed to delay implementing interest rates.
“At that time, the banks responded to the request justifying why they felt it was necessary to increase rates immediately. Only one bank was willing to agree, and they applied a delayed implementation period, but since the other banks did not follow suit, they discontinued it,” he explained.
Mr. Panton, who also discussed the issue on The Cold Hard Truth on Friday, said he wrote to the Cayman Islands Bankers Association again this month with the same request, and the banks have once again collectively refused to consider this mitigation measure.
The Premier said he is disappointed with the position the banks have taken and said he expected that they would engage in further dialogue with the Government to determine how best to alleviate the impact of future rate increases.
“I also honestly do hope they will reconsider their position regarding the proposed 60-day implementation delay on interest rate increases and also re-examine the policy of automatic local rate increases every time the Fed raises the US Prime Rate,” Mr. Panton said.
He further stated that he would be doing all he could to “campaign” for the people of the Cayman Islands.s
Mr. Panton said while the banks are insisting that their residential mortgage portfolios are not “degrading,” constituents said their mortgage payments have increased to an unsustainable degree – in some cases,s up to $1,000 or more per month.
“This is a huge increase that might negatively impact any family in these times. We must guard against Caymanian homeowners potentially losing their homes due to the inability to meet increased interest charges,” he added.
Mr. Panton said, “In the absence of cooperation from the retail banks on providing implementation delays on interest rate increases, I would encourage all borrowers to investigate fixed rate mortgage options and to maintain open lines of communication with their lending institutions. “
Government initiatives to help combat inflation
The Premier said Cabinet would be considering other measures to help Cayman’s consumers get through this inflationary period, with some initiatives coming soon.
Through the Ministry of Sustainability & Climate Resiliency, the Government will be offering two programs to help reduce energy costs. The first is a “do-it-yourself” energy audit program, and the next is a program whereby eligible Caymanians may apply to have their homes audited and if they qualify, have their air conditioning systems retrofitted to decrease energy consumption. More details on these efforts will be shared soon.
The Government will also be funding, in partnership with Inspire Cayman training, free financial planning workshops for consumers to help them navigate this high inflationary period by adjusting and containing their costs where possible. These workshops will be offered across all districts of the Cayman Islands, free of charge to participants.
He said similar workshops offered in his constituency have received positive feedback, with participants stating they helped them to manage their insurance costs, borrowing costs, and other necessary household expenditures.
The Premier said there is hope on the horizon, as most economists predict that the current trend of increasing interest rates is nearing its peak, and rates should start falling soon.
In the meanwhile, the Government will make every effort to mitigate the current cost of living crisis that is negatively impacting thousands of hard-working, diligent Caymanians,” M.r Panton said.
“In the absence of the cooperation that we’d hoped for from the retail banks, we will endeavor to find other ways to effectively alleviate the stress that the rising cost of living is creating for Caymanian families,” he said.