Non-performing loans in housing sector skyrocket in 2019

– 34% rise in defaulters, as more persons unable to make house payments

One of the measures taken by the President Dr Irfaan Ali-led Government has been to arrange a moratorium on mortgage payments until this year-end. It comes not a moment too soon, as the Bank of Guyana’s 2019 report has revealed a horrifying statistic of the sharp rise in non-performing loans in the housing sector.
According to the bank’s year-end report, non-performing loans in the housing sector increased by 34 per cent compared to the 2018 level. The bank described this as a major threat to the expanding housing market.

“Total housing market loans expanded by 3.8 per cent as the market rebounded towards its long term trend. However, nonperforming housing loans also increased by 34 per cent over the 2018 level and remains the main threat to heat-up the housing market,” the report says, though it noted that the housing market still had an overall lower level of stress compared to 2018.
The report also notes that total credit expanded by 8.5 per cent above the December 2018 level, which it noted is the largest annual increase spanning the previous four years. Besides housing loans, other Private Sector loans also added to the total credit figure.
Overall, the Bank of Guyana reported that the level of non-performing loans deteriorated by 1.3 per cent and was recorded at $30.1 billion at the end of 2019, while total loans grew by 8.2 per cent.

The year 2019 coincided with an economic downturn in the non-oil economy, which in its turn coincided with political upheaval as the former A Partnership for National Unity/Alliance For Change (APNU/AFC) Government fought for its political survival, despite losing a No-Confidence Motion (NCM).
Despite the Constitution stipulating that elections should have been held within three months, this was not done. In the ensuing political uncertainty, many investors held back their investments and businesses even closed their doors in anticipation of unrest.
The situation was not helped when the COVID-19 pandemic hit in 2020, forcing even more businesses not deemed as “essential” to close their doors. In addition, the former Government failed to provide any stimulus to help them survive the storm.
After taking office in 2020, one of President Ali’s first acts was to initiate talks with the Bank of Guyana and the Guyana Bankers’ Association, on measures that would ensure the average Guyanese could remain solvent even if they are unable to pay their bank loans due to the pandemic.
The result was President Ali announcing that his Government had reached agreements with the local banking sector to extend the moratorium on loan payments until this yearend, and to cut interest rates.
This means that customers with mortgages and other loans will be spared the financial burden of servicing these loans during the pandemic. In addition, their loans will not be classified as non-performing, ensuring that they do not default.
This publication had previously reported that the Housing Ministry will be moving towards the distribution of 10,000 house lots over the next year – one of the promises in the People’s Progressive Party/Civic (PPP/C) election manifesto.
In his contribution to the budget debates, Minister of Housing and Water Collin Croal had informed the National Assembly that within four months, his Ministry is aiming to distribute over 2000 transports and titles.
He had also revealed that there are plans to streamline Mortgage Interest Relief for low and middle-income homeowners and increasing the limit for low-income loans, and a reversal of Value Added Tax (VAT) on building materials.
“In 2013, the PPP/C Government introduced the Mortgage Interest Relief initiative for persons with mortgages at the banks up to a ceiling of $30 million. In 2017, the coalition Government reduced the ceiling to $15 million. This reduction negatively impacted upon approximately 55 per cent of those borrowers,” Croal said.