JMEA worried interest rate hike will affect housing market

John Mahfood and Donovan Wignal, President of the MSME Alliance
The Jamaica Manufacturers and Exporters Association (JMEA) has raised alarm that the Bank of Jamaica's decision to increase the policy interest rate to five per cent will have a negative effect on the housing market.
JMEA President John Mahfood said the rate hike will force banks and building societies to provide mortgages at higher interest rates.
Mr. Mahfood warned that this will further push the price of houses out of the reach of ordinary citizens.
He noted that before the latest increase in the policy interest rate, building societies were charging 8.5 to nine per cent on mortgages for houses. But with the latest increase, Mr. Mahfood believes mortgage interest rates could climb to as much as 10 per cent. 
"That has a direct impact on people who want to buy houses and it makes it much harder. In addition to that, the price of houses have gone up, I would say 30% to 35% because of the global inflation on building supplies. So, the house that would have cost $12 million before is now costing $15 [million] or $16 million. When you add the increased interest rate, it pushes that ability to buy the house out of the reach of many people," he reasoned.   
Mr. Mahfood said some developers might also cancel construction plans because of increased interest rates and the unfavourable climate.   
"It's going to damage the economy. It's going to mean that people won't have work, increased employment, and it will mean that people won't be able to afford homes, and that's my big concern about what the BOJ is doing," he reiterated. 
Donovan Wignal, President of the Micro, Small and Medium Sized Enterprise (MSME) Alliance, has also asserted that the BOJ's interest rate hike is ill-advised.
He believes there should be a revision of the country's inflation target, since the four to six per cent target was set prior to the COVID-19 pandemic and the geopolitical influences that have caused a rise in food and fuel prices. 

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