Acting Managing Director of the Jamaica Mortgage Bank (JMB), Milverton Reynolds is predicting that the 2006/07 financial year will be a very profitable one for the JMB. “We really expect that 2006/07 is going to be a very good year for the bank in terms of our financing of residential construction. We’re actually projecting total commitments of $3.7 billion financing some 2,910 units. This represents a 46 per cent increase over 2005/06,” Mr. Reynolds said in an interview with JIS News.
This optimistic projection is largely based on developers’ response to the Bank’s lowering of its interest rates by three percentage points, from 21 per cent to 18 per cent in December 2005. “Since we’ve announced this [the lowering of our interest rates], we have been getting a lot of enquiries and the calls are still coming in. We have quite a number of really good projects that we are looking at financing,” he said.
The Acting Managing Director noted that over the last six to seven months, the composition of the Bank’s revenues has been shifting, with the bulk of the Bank’s income coming from its investment in the construction sector. “As at the end of November 2005, 65 per cent of our revenues came from construction-related activity, which is primarily lending to developers for residential construction. This compares with 51 per cent in November 2004,” Mr. Reynolds informed.
Continuing, he revealed that the JMB has therefore opted to shift its focus from investing in Government securities to investing more in the construction industry.
“We have been putting more and more of the funds into financing good viable housing projects. These projects are primarily for the lower-middle, middle and there are a few in the upper-middle income market, which is really where the greatest demand is right now,” he said.
The JMB would provide funding for housing developments all across the island, mainly “in the areas that the Government has indicated that development is going to take place, which are St. Ann, St. James and Hanover, the areas where they have planned for increased investment in tourism,” Mr. Reynolds told JIS News. Projects will also be implemented in the traditional areas of Kingston and St. Andrew and St. Catherine.
Reduction in the JMB rates comes at a time when interest rates in the sector have been moving downward in keeping with the Government’s policy of reducing interest rates. “What has happened is that interest rates have been trending down and with the trending down of interest rates, it means that our cost of funds have also been trending down, and we thought that it would be prudent to review our interest rate structure,” Mr. Reynolds explained.
While acknowledging that the Mortgage Bank has done its part to reduce the cost of housing units, Mr. Reynolds is hoping that the developers who get loans from the JMB, would pass this on in the price for their units, and therefore homeowners would benefit. Meanwhile, the Acting Managing Director told JIS News that the Bank has streamlined its operations, particularly as it related to project financing, and so, was now operating more efficiently. “Because of the efficiency of our operations, we are able to reduce our margins and still make profits,” he pointed out. This was evidenced in the JMB’s performance over the period April to November 2005, compared to the similar period in 2004. “At the end of November 2004, we had profits before tax of $120 million. In November 2005, we had profits before tax of $155 million, which is a 29 per cent increase,” he pointed out.