Top CIBC/First Caribbean banker Rolf Phillips looks at the changing banking environment and offers some advice for borrowers in 2012…
Caribbean Property Magazine-March 2012
The regional residential property market continues to exhibit weakness in many areas underscored by prevailing weak economic conditions in most countries!
On the banking side financial institutions continue to pay close attention to their property portfolios to ensure these remain healthy. While levels on non-performing loans continue to be high the good news is that flows of new loans into the non-performing category have slowed in the past twelve months! This increased stability has allowed resources to concentrate more heavily on recovery rather than prevention. The greater part of the effort in this area is focused on working with borrowers (who got into difficulty due to loss or reduction in income) to find solutions, which will enable then to recover over a reasonable period of time.
On the positive side there is still some demand for domestic residential mortgages. However, the levels are still low compared to the period before 2009. Levels of demand are even lower for International Mortgages, which is reflective of the low levels on turnover in this sector. Most of the current turnover is focused in the upper end of the second home market.
The good news for borrowers is that most financial institutions are experiencing unprecedented high levels of liquidity. Low demand for corporate and retail loans as well as a lack of good investment opportunities is impacting the balance sheets of most financial institutions and creating these very strong surplus funds positions.
Most banks are therefore keen to lend to well-qualified borrowers and willing to offer great deals to attract the best loans. Borrowing rates have fallen quite significantly in some markets. The most acute of these is Jamaica driven initially by the restructuring on Government borrowing, but now continuing by competition among banks.
Borrowers will find that in most cases the conditions for obtaining new loans are still restrictive and they should expect to provide a lot more information than in the past. However, the effort is well worth it as the rates on loans and the ability to negotiate good deals is better than it has ever been in this region. Borrowers who are able to meet the requirements are encouraged to use free equity in residential property to obtain lines of credit, which can be used for multiple purposes. Home Equity Lines of credit are becoming increasingly popular in this region and is enabling consumers to borrow at much cheaper rates than before for consumer and other purchases. A line of credit is a very good product to have as it makes borrowing available in case of need on a revolving basis for periods of up to ten years. Current conditions should teach us that borrowing is least available when you need it the most. Having a committed credit line available in case of need is there a prudent practice.
BIO…Rolf Phillips is Managing Director Retail Banking at CIBC First Caribbean International Bank and is one of the most experienced bankers in the region. Based in Barbados he travels widely in the region visiting the bank’s extensive network of branches and developing new business. An innovative and visionary banker, he can be contacted at Tel: 246 367 2553 or by Email at email@example.com
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