Mortgage Approval Rate Drops To 43%


Tribune Business Editor


MORTGAGE loan approval rates have been slashed in half to 42.6 per cent in just two-and-a-half years, highlighting the commercial bank retreat from the vital Bahamian housing market.

Data produced by the Central Bank of the Bahamas' research department shows that less than one out of every two mortgage loan applications is being approved, amid lender reluctance to take on greater exposure to the sector.

The data, accompanying the Central Bank's December 2017 economic developments report, revealed that mortgage loan approval rates were around the 80-90 per cent mark as recently as the 2015 second quarter - meaning applicants enjoyed the same success ratio as counterparts applying for consumer and commercial loans. Approval rates for these categories stood at 88.9 per cent and 90.7 per cent, respectively, for the 2017 fourth quarter. And consumer loans, as they have done for every quarter since early 2015, account for 90-95 per cent of all loan applications.

The Central Bank data underscores the warning voiced by Tim Rider, Royal Bank of Canada's (RBC) Caribbean vice-president of sales, who told this week's RoyalFidelity Business Outlook conference that inadequate market infrastructure that had resulted in the bank's "diminished appetite" to lend to middle and lower income mortgage borrowers.

"The current mortgage lending infrastructure has substantially diminished RBC's appetite for mortgages to the average Bahamian, and forced our focus up-market to those borrowers who are more affluent and have proven ability to repay their debt," Mr Rider told the RoyalFidelity Economic Outlook conference.

"The mortgage lending infrastructure, and lending infrastructure in general in this country, needs to improve so that we can actually open the lending books." Such a "diminished appetite" - by both RBC and other commercial banks - is painfully highlighted by the Central Bank data, even though many may not wish to process Mr Rider's comments.

Elsewhere, the Central Bank revealed that it will "investigate policies to promote a soft landing in terms of easing system liquidity", which hit near-$1.8 billion at 2017 year-end - a rise of $351.2 million for the full 12 months, which was almost triple the growth seen in 2016.

The significant increase is due to the Government's $750 million foreign currency bond borrowing, the proceeds of which have worked their way through the system and increased commercial bank surplus liquidity. The $1.8 billion in surplus assets represents assets that banks wish to lend, but for which they can find no qualifying borrowers, resulting in depressed deposit rates and punished savers.

The Central Bank data said the $750 million bond issue produced $250 million in new funds, and was the primary factor behind the $506.2 million increase in the foreign currency reserves, which hit $1.408 billion at year-end.

"At end-December, reserves were equivalent to an estimated 5.3 months of total merchandise imports, compared to 3.8 months a year earlier, and the three months benchmark," the Central Bank said. "External reserves represented 95.2 per cent of Central Bank's demand liabilities, compared to 68.5 per cent at end-December 2016."

Proceeds from the Government's foreign borrowings were also used to repay Bahamian dollar debts, helping to reduce domestic credit by $328 million. "Refinancing operations in the public sector and the sale of private sector debt influenced the outcomes," the Central Bank said.

"Net claims on the Government fell by $159.6 million, a turnaround from the $357.6 million rise in 2016. Credit to public corporations weakened by $7.1 million, after a $29.3 million increase in the prior period. Private sector credit contracted by $161.3 million, compared to a $92.4 million decline in 2016, dominated by sales of non-performing mortgages."

Mortgage and consumer credit contracted by $78.8 million and $49.9 million, respectively, with commercial loans also down by $32.6 million.

On the fiscal side, the Central Bank said selling the Government's state-owned enterprises (SOEs) had "the potential to promote long-term fiscal sustainability".

"Based on current estimates, Government transfers to SOEs will total $109.2 million in fiscal year 2017-2018 (4 per cent of total spending)," it added.

Turning to foreign direct investment (FDI) projects, the Central Bank said the $55 million redevelopment of Harbour Island Marina and surrounding buildings into a boutique 34-room hotel and 10 villas was among the new developments coming to the fore.

That project, accompanied by 4M Harbour Island Ltd, is accompanied by High Heat Real Estate's $40 million, 50-unit condo development at Love Beach in New Providence. And Vanquish Developments is moving on a $37 million "motor sport, tourism and commercial development" in Grand Bahama.

This will be constructed on 30 acres of beachfront property, and feature "a 70-room hotel, 300 room villas, karting track with educational facilities".

Tourism data showed that air arrivals to New Providence were down by 4.1 per cent for the six month period to end-October 2017, falling to 550,944 compared to 574,187 in 2016.

And Nassau Airport Development Company (NAD) data showed that the uptick in passenger arrivals towards the end of 2018 was not enough to cancel out the declines seen earlier in the year.

"Total departing visitor traffic, net of domestic departures, firmed by 5.1 per cent, extending the 4.1 per cent expansion registered a year earlier," the Central Bank said.

"Underlying this outcome, non-US international departures strengthened by 14.5 per cent, a reversal from a 4.2 per cent decline in December 2016. In addition, departures to the main United States market firmed by an additional 3.4 per cent, after the 5.7 per cent increase registered in the prior period."

Yet it added: "An analysis of longer-term trends for the year revealed that despite periods of growth during the fourth quarter, declines during earlier months contributed to a 0.8 per cent softening in the number of international departures from the Nassau airport in 2017, relative to a gain of 1 per cent in the prior year.

"In particular, the high volume US component decreased by 0.6 per cent, a reversal from a 1.9 per cent uptick in the previous period, while non-US international departures fell by an additional 1.8 per cent after a 4.1 per cent contraction in 2016."


bogart 2 years, 5 months ago

Dont blame the mortgage infrastructure or some vague outside challenges....BLAME ALL LENDING INSTITUTIONS ESPECIALLY FOR THE MORE ROGOROUS APPLICATION PROCESS TO now QUALIFY.....KNOWING ALL THE BAD LOAN BANKS GAVE OUT 1 BILLION PLUS WORTH OF DEFAULTS AFFECTING 8,000 PLUS BAHAMIANS.....BUSINESSES WHO PUT UP HOMES SS COLLSTERAL LIKE FREEPORT AND NOW DEVALUED.......DUH Bahamians know when dey getting gossied by Pastors, by politicians , by govt Ministry so why dont you think dey know when dey getting goosied by senior bankers. Suggestion to increase business is to review nbad loans and where errant bankrrs fudging figures policies not followed etc...bring in customers write off.... interest if negligence or fraud etc done?.....work out payment plan....better to collect something.....review the huge targets that emlpoyees have to meet .....ie 3million means that that loan officer has to find 10 to 20 customers who have saved downpayment legal fees etc and other banks doing same difficult....or get you own sales team cause some loan officers just plain cant smile much less sell....etcetc Going after the affluent foreign or local will now drive up prices for homes.....and will also drive up prices all the way to the cheapest houses. Pushing prices up will make it even more difficult for the majority of Bahamians .......home prices go up rents go up....etceyc


ohdrap4 2 years, 5 months ago

Well on top of high construction costs, the banks also partnered with the furniture companies to further scalp people.

so even if you get a modest 200,000 mortgage, they encourage you to get 40,000 luxury furniture and appliances.

the 600 dollar stove cooks the same as the 2000 one.

but people do not see that.


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