Banks Tighten Up On Lending

Details

Banking

Saturday, 07 May 2011 02:30

By Alex Holder

Antigua St John's - In the face of economic hardship, local banks seem to have tightened up on personal and corporate mortgage loans, with interest rates between 8 and 12 percent.

Caribarena.com surveyed the current rates, and found Royal Bank of Canada topped the chart with an 8.5 percent interest rate on personal mortgage loans, and financing at around 80 percent, depending on the quality of the application.

RBC currently has an ongoing 7.75 percent interest rate, and its 80 percent financing can be flexed to 90 percent in some instances, but only with the addition of mortgage indemnity insurance. The latter is a common practice for most banks.

In the corporate section, the situation changed dramatically, with interest rates on mortgage loans running as high as 12 percent.

RBC Accounts Manager Edmund Roberts said the situation in the loans department is not a “one size fits all scenario". The bank assesses its applicants based on criteria including experience, age, and financial status. “Everybody is different," he explained. "We have the career business people who have proven themselves, then we have the others who are now looking to make their mark in the world.”

Manager Eloise David said while the bank has not had reason to revise its lending policy, it has not been immune to delinquency. However, the level “is nothing to scream about” when compared to the bigger picture.

Scotia Bank, meanwhile, is offering an 8 percent interest rate, topped with 95 percent financing and the customary Mortgage Indemnity insurance. This security guarantee can be avoided with financing of 75 percent and under.

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When asked about the bank’s standing in the loans department considering the current economy, James Fabian, a personal banking officer, said, “We’re holding our own. We’re not getting a flood, but customers are coming in.”

He said Scotia Bank has always been cautious with its lending, and the current economic climate has not forced it to make any adjustments. “It's always good to have good loans on the books," he said. “There have always been strict lending policies and that has served us well.”

For commercial loans, the bank’s interest rates ranges from 11.25 percent to as much as 13. This can be affected dramatically when borrowing in US dollars, and can drop to as little as five percent. Its level of financing, has a maximum of 60 percent. This fluctuates however based on the applicant’s security pledges, and what s/he intends to use the money for.

Over at FirstCaribbean International Bank, an 8.5 percent interest rate is offered on the reducing balance for residential mortgages. This requires a 20 percent injection or at least a 15 percent indemnity.

For its commercial loans, the bank maintains a “no unsecure loans” policy, with a prime rate of 10.5 percent. Its injection can be as high as 40 percent, but subject to change based on the level of security injected by the applicant.


Meanwhile, the Eastern Caribbean Central Bank (ECCB) quotes prime mortgage rates across the Eastern Caribbean as being between 8.5 percent and 12.25 percent, with the lowest in Grenada, and the highest in Trinidad and Tobago. Antigua & Barbuda is averaged at a 10 percent prime rate.

Grenada shares the same prime average with the Commonwealth of Dominica, and St Kitts & Nevis.

Other quoted prime rates are Anguilla - 10 percent; Montserrat and St Lucia - 9.5 percent; St Vincent and the Grenadines - 9 percent; and Barbados - averaging between 8 and 10.45 percent.

The prime mortgage lending rate for the United States stands at an average of five percent.

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