$3.8 billion in mortgage loans on the books

MMore than half of the homes in Barbados are owned outright, with no mortgage debt. Only 15 percent have a mortgage agreement, another 15 percent are rented or leased, and 11 percent of homes are rent-free.

This is the picture of home ownership on the island, as outlined in a special section of the last Financial Stability Report 2023 which was released last week.

At the same time, concerns were raised that given that financial institutions have $3.82 billion in mortgage loans on their books, an economic downturn could lead to a high level of mortgage defaults.

The report, which was compiled by the Central Bank of Barbados and the Financial Services Commission (FSC), included a special section authored by Central Bank research economist Pinky Joseph and used data from the 2021 COVID-19 Household Survey.

“The housing market in Barbados is characterised by outright ownership (53.2 percent), but a significant proportion of individuals (32 percent) pay a mortgage or rent,” Joseph noted.

The economist outlined how the housing market compared to what was happening with deposit-taking institutions (DTIs). He said mortgages represented almost half, or 45.8 percent, of the sector’s loan portfolio.

She explained that the DTI sector brought with it “greater exposure” to the residential real estate market, worth $3.82 billion in mortgage loans.

“The credit union sector had the largest exposure, with mortgages representing 49.9 percent of total loans, closely followed by commercial banks (45.6 percent).

“With this significant exposure, the potential global macroeconomic slowdown could result in high mortgage delinquencies as labor market conditions and consumer activity weaken,” Joseph said.

To provide more background information on the activities in the local real estate market, it was announced that the number of new mortgages in 2023 was 10 percent lower than in 2022. The number of mortgages fell from 2,070 in 2022 to 1,850 last year.

Residential mortgages fell by 242. In contrast, commercial real estate mortgages rose from 42 in 2022 to 65 last year.

According to the economist, this is a sign that the private sector has confidence in continued economic growth.

In an effort to increase demand for residential mortgages, financial institutions were reported to be partially relaxing their requirements for borrowers.

“While most institutions have eased lending standards for households and businesses of various income levels, a few institutions indicated that the expanded limits depend on the risk profile of customers,” the economist wrote.

(IMC1)