Local mortgage pain continues with rate hike
(CNS): Local banks will be putting up their loan rates but, in line with the agreement made with the government last month, they will be waiting thirty days before increasing interest rates on home loans and mortgages. Nevertheless, with the cost of living already squeezing people to the bone, the one-month reprieve will offer very little against the current finical pain for most families.
The US Federal Reserve increased rates by 0.25% on Wednesday in its losing battle to get inflation down to 2%.
Officials said that indicators suggest that economic activity in the United States has been expanding at a moderate pace. “Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated,” they stated in a release about the rate increase.
Here in Cayman, mortgage and home loan interest rates will increase to around 8.5% on 25 August, allowing for the 30-day delay that the local banks agreed to following discussions with the premier about the impact the constant increases over the last two years are having on families.
Inflation is currently running at around 6%, which is far less than the high of 12% last year. However, it still means that prices are increasing, and with Cayman dependent on imports, we are also importing inflation. With no central bank or regulating authority setting interest rates, the local retail banks have largely so far implemented every rate hike rolled out in the US almost immediately.
- Fascinated
- Happy
- Sad
- Angry
- Bored
- Afraid
Category: Banking & money, Business
Another thing contributing to families sinking under the unmitigated financial strain is that successive governments have done absolutely nothing to address CUC’s monopoly and the stranglehold on renewals and making solar more affordable and with fewer restraints.
Governments seem more interested in maintaining business as usual than doing anything to ease the pain and suffering of ordinary working folks.
How do we intend to rid Cayman of fossil fuels beyond mere talk? Words without deeds amount to nothing.
A monthly utility bill is a mortgage!
Maybe the other media bully mouthpiece can ask CUC, or the Government to explain that I was away for three weeks, but my utility bill was the same as before?
The truth be told some of us will need to have a retirement plan of relocating to another affordable place to live out our golden years and God help those who are unable to, as in the case of visiting some pensioners and under the grueling heat they are unable to turn on the air-conditioning.
Stop all your complaining or do something. Welcome to the crunch kids. lol
The crazy part is, these banks will lock you in at up to 2% lower than prime rate. They wont out reach to you and let you know. I know someone whose mortgage went down $2,000 by locking in to a lower rate.
I moved my mortgage last month and it wasn’t until only that point that bank said, oh hey we’ll give you 5.99%. Yet I was pay 8.25% as they kindly let my mortgage go up by $1200.
They are reactive and not proactive and will rob you until you notice.
You are always free to negotiate with them. The problem, however, will usually be that you don’t have enough leverage for them to care
Yes, but problemo is that the fed anticipates that rates will be well below where they are now in 2 years.
So while ‘locking in to a lower rate’ is good for perhaps the next year and a half – in 4 years it will likely be way above market – then you have the fund of trying to re-finance.
I am still waiting an answer as to why the local banks are allowed to raise their interest rates when the US Federal Reserve raises their rates. Thats understandable when the institution is borrowing money from the fed to lend but the banks in the Cayman Islands are not borrowing from the fed to lend to its clients in Cayman. This just seems like a license for the banks to print money and our government is complicit.
Interesting you wait while could do your own research. This has been explained in previous articles on CNS and other local media. It’s not really that difficult of a subject.
KYD currency is fixed to USD, so whatever the Fed decides, happens also to us with immediate effect. It’s terrifying that veteran MPs, in charge of Billions of our money, don’t understand the fundamental principles of our domestic economy.
They are just pandering for voters. Political trickery to show the illiterate and unlearned that they are fighting for them. Sad.
KYD/CI$ has also outlived its usefulness. It only serves to generate profits for the banks by charging people exchange fees to/from USD$. Moving to USD$ is long overdue. This is even the case with Caribbean countries with floating rates – it’s exponentially more so for Cayman with a pegged exchange rate.
See the following two articles:
“Core argument: The structure of Caribbean economies is different in quantity and quality. Caribbean economies are import dependent. This is not a value judgment or a temporary state of affairs; it is an immutable fact of the world. Even the most basic economic activity, agriculture, requires tools made from metals not found in the Caribbean – they must be imported. This has been the state of the Caribbean from the beginning.
All imports are paid for using an international currency – usually U.S. dollars. There is no advantage for Caribbean countries to have their domestic currency; all domestic currencies in small economies are anachronistic. Caribbean countries should abandon their local currencies and adopt the U.S. dollar. The region’s governments have uniformly abrogated their duties to design and implement credible macro-prudential policies leading to unjustified socio-economic degradation.
Properly construed, the current state of monetary affairs is a persistent abuse of power by governments to the detriment of Caribbean citizens. If Caribbean people used U.S. dollars as their sole currency, that would significantly expand their economic freedom and opportunities.
In essence, dollarization merely makes explicit what is already true: small open economies have a hard foreign currency constraint. It is not the so-called implementation of a straitjacket. The straitjacket has already been there.”
https://cpsi.media/p/notes-towards-caribbean-dollarization
And
“The currencies of Caribbean countries have now outlived their usefulness, and have become a liability. They were devised at a time when most payments were made using notes and coin, issued in distant metropolitan centres. Scarcity of the means of payment was a severe hindrance to commerce. In response Currency Boards were set up, to issue local currency as needed in the colonies. The system worked well because the local currency issue was backed by an equivalent value of Sterling, in a global system of fixed exchange rates. In contrast, nowadays payments are made mostly by electronic communication, credit and debit cards, cheques and drafts, with settlement over digitized bank accounts. In today’s world an own currency has become a liability for small economies, limiting access to international goods and services, exposing residents to risks of currency devaluation and inflation, eroding the value of domestic savings, increasing economic inequalities, providing a tool for unproductive government spending, and diverting attention from the need to increase productivity and enhance international competitiveness.” https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3400180
Give pension to pay off for civil servants too, not just private people. Civil servants have mortgage too.
Shouldn’t they have private pensions tied to their side hustles?
There’s a $2.1 billion hole in your govt account for your healthcare. i don’t think they are interested in leaking any more money from other funds.
Another greed tactic are those variable rate mortgages. In the states they’re fixed for the full term of the loan. Despite what the fed does, fixed rate mortgages remain the same… no chance in monthly payments.
Fixed for 2 or 3 years, then variable and with early prepayment penalties. Read your fine print. #grownupland
5:06 – What in the world are you talking about? I’ve been paying my mortgage in the states for 8.5 years. The rate is fixed for the life of the loan. That fixed for 2-3 years scam is the rip off product offered in Cayman. Read your own fine print, mine is clear.
There are no US banks offering truly fixed rate mortgages in Cayman. Would be nice if there were. The world is brimming with competitive financial products that don’t exist in Cayman.
True, and I never said it was in Cayman. The property with the fixed rate mentioned above is in the states. It would be nice if Cayman offered true fixed rate mortgages instead of that variable scheme that places the middle class at risk of losing their home when the Fed raises rates.
What US bank offers any mortgages in Cayman. I believe it is none.
Just read today n the WSJ that 90% of the home mortgages in the US are at a fixed rate for the duration of the loan. Seems you are making things up.
That’s of course true and wonderful, but the Cayman Islands is not a territory of the United States, and local products and breadth of services (where they exist) are substantially inferior. The handful of licensed banks offering local consumers retail mortgage products are not USA banks, or even Cayman Islands banks. There is no FDIC or SEC/DOJ oversight. CIMA has gifted these foreign banks free license to create their own risk-based and profit-based approaches. There is no governing client acceptance policy, and no local government interest in consumer advocacy. It is Pirates of the Caribbean. Enjoy your stress-free USA mortgage.
Cayman is in the same boat as the UK, Canada and others.
Nothing new here.
I hope to see some distressed sales so I can buy some real estate with cash.
Lusting for predatory buying of distressed properties from your fellow Caymanians tells us all the sort of human you are.
Time after time, harsh consequences, especially in the housing market, of insufficient savings and overspending are prevented by bail outs by the authorities.
The result has been that unless would-be housebuyers throw in everything they have, leaving no “margin for misfortune”, they will be outbid for a house, so any slack that arises is rapidly taken up, as buyers drive prices up in their own faces, and the prudent get shoved aside.
Individually, it looks as if a buyer could not possibly have afforded to buy if they had to save, arousing some sympathy for them, but, collectively, buyers themselves made it that way. You could double their income, and they would soon be back in the same position, with house prices much higher. These is similar spending that also becomes seen as practically essential, such as holidays, pay-TV, etc.
As far as I can see, the only way to stop that behaviour is to allow the most reckless to be bankrupted, including housing buyers who have over-reached their secure ability to pay, to have their housing repossessed, to provide a salutary example that the risks of not leaving adequate margin for misfortune are seen to be *real*, rather than just scary but ultimately unlikely. Presently, house prices are on a one-way ratchet which only allow inflationary pressures.
Repossessions would then knock down house prices, enabling sensible savers to buy them, an example of prudence paying off.
Instead of dealing with the real issues of Caymanians – here we go again – they going to Barbados to bring more poverty stricken criminals on us! 🙏🏻🙏🏻🙏🏻🙏🏻🙏🏻
No brains – rocks in their heads.
Optimistic to think more than a handful on Bajans on those flights bound for Cayman.
It’s a personal taxi service for Kenneth, to his Caribbean tourist board meetings.
The beatings will continue until morale improves.
Can the government please approve the pension withdrawal for mortgage paydown (not payoff) asap.
I guess I should have used my pension money for the mortgage instead that new boat.
listen just vote out the current government next year and stop whining as they obviously dont care. Just done vote for any of them! we need to set examples, let us down and we will do the same. We need a government bank by the people and for the people, we are literally paying these banks to keep our money with them. Its high insanity
The voting swamp doesn’t look good on the other side either. We are doomed with the fools we have to choose from
it’s like listening to the same broken record for a lifetime. every election the next government will be better…..no they wont.
Lol if you think the other guys are going to fix this i can only assume you have been asleep the last 20 years.
Where are the politicians ensuring term deposit rates go up in line with mortgage rates? Legislation should be done to prevent these weasel banks from being Lightning fast at raising mortgage rates but slowwwww as heck for raising term deposit rates or I’d say more often they don’t even raise the term deposit rates. Just another example of Caymanians and expats getting shafted.
Agreed. One year term paying less than 3% but mortgage 8.5%. That’s one hell of a profit margin!!
The Main Street bank I work with is offering 4- 4.80%
Additionally I am getting 5.50% in USD T Bills
Bet your real estate agent advised you better not pass up this deal?
Did they ever speak about interest rates?
cig 30 day plan is laughable,,,,welcome to wonderland.
This incredible. private sector greed and it is still ci government fault.
because the government should have a framework in place to prevent these criminals from running rampant. but when you have greedy, corrupt and lazy people in all branches of government, nothing gets done. so yes it’s government fault.
I’m getting 5.25% on a 9 month CD account in the states. That was before this week’s interest rate hike.
@7:59 Don’t forget the tax you pay on interest earned needs to be deducted to get your real rate of return.
@8:12 – Tax is zero as gains are shielded by paper losses from depreciation of real estate. So it’s 5.25% earned and kept. 😂
they always fail to understand that….that…..the progressive tax rate system works pretty well unless your a certain category of person.
In the Cayman Islands interest income is tax free on US TBills as is all interest income even derived from a U.S. source. My Advisor showed me this.
all due to to the nonsensical over-reaction to covid.
we are paying the price for shutting down the world economy and then giving everyone free money.
Nonsense. We are an island nation globally connected. Wake up and smell the sargassum.
Mortgage and credit card debt is USD denominated in these here parts. Nothing would be more destabilizing than attempting to float the KYD with MPs that don’t grasp the currency peg, USD central bank policy, and against >$2.1bln in undeclared off-balancesheet government liabilities. We would be re-risked to BBB or lower in a fingersnap.
This just in: Cayman Dollar pegged to USD!
Has the interest increased in my savings account yet? No, didn’t think so.
And Butterfield charges me 1.5% to take my USD earned funds in out if my savings account if I want cash!!
Butterfield just put random charges on my account. What can you do?
Butterfield are appalling. I am astonished that anyone uses them:
1. Very old-fashioned, extremely unintuitive banking app;
2. Inability to send electronic transfers except <14:00, Mon-Fri;
3. Multiple transfer failures whereby the app promised to send money but failed to do so; and
4. CI$ 2 charges for both ATM withdrawals and in-country electronic transfers.
5. Many other fees, representing their incumbent position.
CIMA bank fee comparison table. I used this August 2022 Cayman Islands Monetary Authority (CIMA) comparison table of banking fees: https://www.cima.ky/upimages/commonfiles/RetailBankFees-1August2022_1659368841.pdf
Recommendation: CIBC First Caribbean. After anaylysing the options, and visiting several banks and discussing their account options, I went with CIBC First Caribbean. CIBC stands for Canadian Imperial Bank of Commerce, so it is Canadian-controlled and is like banking with a Western bank. Most notably, as it is how we routinely interface with our bank, the app is efficient, effective, and recognisably modern. If you select the correct accounts (Direct Banking KYD and Direct Banking USD), there are no fees for domestic electronic transfers, or ATM use. This is because they do charge you if you use counter services. Most other banks penalise tech-savvy users by imposing charges on electronic transfers and ATM use, to subsidise customers who need expensive human cashiers, etc. With CIBC's model, the costs lie where they fall: with those using cashier services, etc.
Application process. The CIBC application process is both efficient and almost entirely online (again, something else that most of us take for granted in our home countries), beginning here: https://www.cibcfcib.com/personal-banking/apply-for-a-product.
In July 2023, CIBC modernised further, requiring most transactions to be conducted electronically. This is plainly the most efficient option, and should allow them to continue to offer low fees to technologically literate customers: https://www.cibcfcib.com/binaries/content/assets/campaigns/cessation-of-over-the-counter-otc-transactions-cayman.pdf
Please let us know if you discover — ever — a local savings account that results in more money in the account at the end of the year. That would be a blessing.
So why charge 2% more than US banks? Also wondering where that 6% inflation figure came from. Seems more like 15%.
That is due to the country risk premium.
My mortgage started at $1,200 in 2021, it’s now $1900… My CUC bill used to be $200, it’s now $500…
In the meantime, my salary has not changed by a single penny.
I live where you vacay. Smh.
Could you wallow in self-pity a little more? I’ll record it this time, put some silly music to it and upload it on TikTok.
This Mouse person is a complete waste of life.
Perhaps the mouse is rich?
Riches gotten by honest industry are very honourable.
Riches gotten by subterfuge at the expense of the innocent is a curse.
Most of the rich either inherited their wealth or gained it by nefarious means.
There are no good billionaires.
To bad for you. I invested in equities at an average return of 10% annualized over 10 years. Now I am retired I am getting 5% + on TBills both in USD and GBP.
My investment advisor has been awesome. If I followed all my friends who get their information from YouTube I would be a lot worse off.
The S&P 500 10 year annualized return is 10%.
Kept me in the market during downturns and focused on the end goal. Certainly an attainable number.
I bet your real estate agent told your real estate is a great investment right?
Won’t affect the bigwigs in CIG on their inflated salaries, expense accounts and associated perks and backhanders. As per usual, it’s the ordinary folk who get stiffed.