Central Bank of The Bahamas Relaxes Residential Mortgage Guidelines for Banks and Credit Unions

Central Bank of The Bahamas

The Central Bank of The Bahamas has made it easier for people to get home loans from banks and credit unions. They’ve done away with the need for a special insurance (mortgage indemnity insurance) that was previously required for borrowers who couldn’t pay a large initial amount (down payment) when getting a mortgage.

Before this change, if you didn’t have this insurance, you had to pay at least 15% of the home’s price upfront (down payment) to get a mortgage. Now, banks and credit unions can decide on lower upfront payments for home loans based on their own rules and how they judge the risk of lending to each person.

The Central Bank still wants to make sure that people don’t borrow more than they can handle. They say that the total amount a person pays monthly for all their debts (like loans, credit cards) shouldn’t be more than half of their monthly income. They’ve made an exception for people who are rearranging their debts into a new loan, as long as it doesn’t increase what they owe.

Banks are also advised to be careful about how much they lend compared to the value of the house. This is important because it affects how the banks calculate their financial safety nets (capital adequacy). Depending on how much of the house’s value is covered by the loan (loan-to-value ratio), different safety rules apply.

The Central Bank plans to keep an eye on how these changes affect the economy and the stability of the financial system. If needed, they might adjust the rules again to either make them stricter or more relaxed. Right now, they don’t see any big worries about the overall economy or the stability of the financial system because of these changes.

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