Central Bank: Real estate mortgage rates going down Media Release MORTGAGE MARKET REFERENCE RATE (MMRR) FOR JUNE 2013 FALLS TO 2.25 PER CENT The Central Bank of Trinidad and Tobago in consultation with the Bankers’ Association of Trinidad and Tobago (BATT) has established a set of rules for the Residential Mortgage Market. These rules, which take the form of a Residential Real Estate Mortgage Market Guideline went into effect on September 14, 2011, and are applicable, in the first instance, to all commercial banks and their affiliated non-bank financial institutions that grant residential mortgages. The Guideline establishes an interest rate benchmark – the Mortgage Market Reference Rate (MMRR) – against which all residential mortgage rates are to be priced and re-priced. This MMRR is computed by the Central Bank using information on commercial banks’ funding costs and yields on applicable treasury bonds and is announced on a quarterly basis (on the first business day in the months of March, June, September and December). Latest available data on commercial banks’ mortgage operations show that mortgage rates maintained their downward path in March 2013. In fact, since the new regime for pricing residential mortgages came into effect, residential mortgage rates have come down. The weighted average rate on outstanding residential mortgages fell to 6.82 per cent in March 2013 from 6.95 per cent in December 2012 and from 7.33 per cent in March 2012. Similarly, the weighted average rate on new residential mortgages declined to 5.91 per cent in March 2013 from 6.28 per cent in December 2012 and 6.75 per cent one year earlier. Lower mortgage rates have encouraged demand for real estate mortgage loans, which continued to grow at a fairly robust pace in the first three months of 2013 and have in-turn supported the growth in overall bank lending. With the financial system continuing to experience high liquidity levels in the first quarter of 2013, deposit rates and Central Government bond yields remained low. The commercial bank weighted average deposit rate held at 0.57 per cent in March 2013, while the 10-year treasury bond yield (based on the Central Bank’s yield curve estimates) fell to just under 3.0 per cent in March 2013 from 3.41 per cent in December 2012. Against this background, the public is asked to note that the MMRR for June 2013, which is based on data for the quarter ending March 2013, fell to 2.25 per cent from 2.50 per cent. Commercial banks and their affiliated non-bank 3 financial institutions are expected to apply this rate to all existing residential mortgage loans that are due to be re-priced as well as new mortgages from June 03, 2013. Customers are also reminded that the MMRR is not the mortgage rate that will be charged by the commercial bank. The mortgage rate will be computed as the MMRR plus a margin which will be negotiated between the commercial bank and the customer. The margin will take into account the customer’s credit rating, the location of the property, the size of the down payment and the size and quality of collateral. central-bank.org.tt/sites/default/files/MMRR%20Announcement%20June%203%202013.pdf
Posted on: Thu, 05 Sep 2013 22:34:49 +0000