EDITORIAL: Mortgage lenders must free up market
AT ANYTIME, but moreso during recession, mortgagors would relish the opportunity to renegotiate loans to benefit from the lower interest rates prevailing. This is not the norm in Barbados since mortgage loans are usually for fixed periods and attract interest rates determined by the lender and subject to variation by notice thereof in writing to the borrower, which usually takes effect three months hence.It is very noticeable that at this stage of our development the menu available to borrowers is narrow if not restricted. In the majority of cases there is no accommodation for open mortgages where repayment is permissible at any time without penalty. There is little scope to obtain a fixed rate mortgage for the term of the loan.Multiple-term mortgages which are ideally suited to first-time homeowners and young professionals are unknown in this market, as are reverse mortgages which cater to matured folk with substantial equity in their properties but are cash starved and barely managing to meet recurrent maintenance costs and doing little better than eking out a living.Government’s policy of providing low-income housing is admirable but the straight-jacket type mortgages available makes the opportunity to avail of the offered facility more onerous than should be the case, largely because of the absence of variations of mortgages which would cater to the pockets and economic circumstances of different purchasers.It is indeed unfortunate that the decision to sell Barbados Mortgage Finance Company Limited, a subsidiary of Barbados National Bank was taken, as had this been retained by Government it could now be the forerunner in opening up the mortgage market by use of a wider menu, thus forcing other competing lenders to follow suit. Of course, even if a wider menu were available, then there would be need to amend legislation which renders mortgage deeds specific to a given loan, thus requiring fresh documentation to be struck each time a loan contract is determined. Whilst on this subject, we ought to call to mind that the current system of land registration in this country is cumbersome, expensive and outdated. Other regional governments have introduced the system of land title by registration which has reduced costs considerably. It has been over 20 years that this system was to have been the mechanism used locally but alas, perhaps it has found itself overtaken by Public Sector Reform.To think that a mortgagor can be burdened with his own attorney’s fees as well as those of the lending institution is almost sacrilege. Yet such is the case. That some institutions are prepared to pay part of the legal costs is a welcome change but it is entirely at their discretion.And so Barbadian consumers, because of their lethargic resistance to most practices which are very much to their disadvantage, continue to accept higher costs than could otherwise be their lot. Similarly, offerings by suppliers/providers which are limited in scope deprive them of choice better suited to their individual circumstance.