Central Bank praised for relaxed mortgage lending rules

The managing director of Scotiabank Bahamas Ltd. has praised The Central Bank of The Bahamas (COB) for relaxed mortgage lending rules allowing the bank to extend more mortgages to customers close to a 10 percent down payment.

Roger Archer told reporters outside the Chartered Financial Analyst (CFA) Society of The Bahamas annual dinner last week, that the relaxed lending rules for residential mortgages implemented last December are giving Scotiabank the confidence to engage clients in buying a second home.

“If you look at our balance sheet, maybe about 60 percent of our balance sheet is home financing. The recent changes by the Central Bank I think have been instrumental in making it easier for us to engage clients to acquire their first and second homes. We’re really keen on participating in this aspect of the market.”

The COB in a December press release said it: “We have relaxed the guidelines for domestic banks and credit unions on the minimum equity injection requirement for residential mortgages.

“With immediate effect, the mortgage indemnity insurance is removed from the Central Bank’s stipulation for borrowers to qualify for a reduced equity or down payment amount on residential mortgages. In the absence of the insurance, the minimum down payment for such mortgages was 15 percent. Moreover, in line with the Central Bank’s relaxed rules for other personal lending, issued in August 2022, financial institutions may also vary or set lower down payment requirements for residential mortgages, in line with their internal frameworks for assessing and managing individual borrower risks.”

Archer noted: “That is also about making it easier for us to reduce the down payment that homeowners would require. For good quality creditors, we’re able now to maybe offer a lower down payment closer to 10 percent.”

The COB warned with the new rules that “lending institutions are directed to observe that personal lending is still subject to the borrower’s total debt service ratio remaining within a prudent limit of 50 percent. The exceptions are debt restructurings and/or consolidations for borrowers who are already indebted beyond this threshold, and for whom outstanding obligations are not increased as a result of the restructuring and/or consolidations.”

Meanwhile, Scotiabank’s online platform is making life easier for consumers and the bank itself, as Archer beamed about how it now allows customers to apply for savings accounts without having to come into a branch at any time.

“We’ve actually, over the last year, improved our online platform. Those customers that don’t have an account with Scotiabank, you can go online, and you can open an account without visiting the branch. When you visit the branch, you’re basically coming in to provide us with your documents and collect your debit card,” Archer said.