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The House of Representatives yesterday (Nov. 29) approved a $500 million loan to the Jamaica Mortgage Bank for the financing of housing developments in several parishes.
Finance and Planning Minister, Dr. Omar Davies who piloted the resolution seeking the government guarantee, informed that the loan, which is being sought from the Victoria Mutual Building Society (VMBS), would go towards the construction of houses in St. Andrew, St. Catherine, St. Thomas and St. James.
He assured the House that the Mortgage Bank would be totally responsible for servicing the loan, which would attract a 14 per cent interest rate.
“The interest rate applicable will be the weighted average yield rate on a six-month Treasury Bill plus one per cent per annum, and the loan will mature in five years,” he informed.
The Finance Minister noted further, that the bond was subject to the terms and conditions of a trust deed between the Mortgage Bank and VMBS.
Meanwhile, Opposition Spokesperson on Finance, Audley Shaw voiced concern about the interest rate at which the Jamaica Mortgage Bank was borrowing the funds, noting that 14 per cent was “far too high a sum”.
“Why are we borrowing money at 14 per cent interest rate through the Jamaica Mortgage Bank in order to carry out housing construction in Jamaica. Fourteen per cent is absolutely too high a rate of interest for the Jamaica Mortgage Bank to be borrowing money at,” he stated, arguing that the high interest rate would have an impact on the cost of the houses.Mr. Shaw further questioned why the Mortgage Bank had not sought financing from the National Housing Trust (NHT) at a much lower interest rate.
Replying Dr. Davies said: “You can’t have a situation where you simply give instructions to the NHT that the Mortgage Bank needs funds, lend them at a subsidized rate, because the Mortgage Bank was designed for a different sector of the market.”
“It’s not simply just let us utilize whatever resources are in the NHT because you could decapitalise this institution,” he noted. The motion was subsequently approved.
The Jamaica Mortgage Bank has over the years provided short term financing for infrastructure development and housing construction islandwide.