$3.8 billion in mortgage loans on the books

ore than half of residential houses in Barbados are owned outright with no mortgage debt over them, while only 15 per cent are under mortgage contracts, another 15 per cent are being rented or leased, and 11 per cent of the housing stock is being occupied rent-free.

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

At the same time, concern was raised that with $3.82 billion in residential mortgage loans on the books of financial institutions, an economic downturn could lead to high levels of defaults on mortgage payments.

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

“The housing market in Barbados is characterised by outright ownership (53.2 per cent) but a substantial proportion of persons (32 per cent) are either paying a mortgage or renting,” Joseph noted.

Outlining how the residential real estate market related to what was happening with deposit taking institutions (DTIs), the economist said mortgages represented nearly half or 45.8 per cent of the sector’s loan portfolio.

She explained that the DTI sector was carrying “greater exposure” to the residential real estate market to the tune of $3.82 billion in residential mortgage lending.

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

“With this significant exposure, the potential global macroeconomic slowdown could result in high mortgage defaults as labour market conditions and consumption activity dampen,” Joseph explained.

Providing more background on activity in the local real estate market, it was disclosed that the number of new mortgages in 2023 was 10 per cent lower than in 2022, falling from 2 070 in 2022 to 1 850 last year.

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

This, the economist said, signalled private sector confidence in sustained growth of the economy.

In an effort to increase demand for residential mortgages, it was revealed that financial institutions were relaxing some of their demands on borrowers.

“While most institutions eased lending standards across households and corporates at different income levels, a few institutions indicated that the extended limits depend upon the risk profile of customers,” the economist wrote.

(IMC1)