MMRR for September 2013 held at 2.25 percent

Photo courtesy

September 02, 2013:

The Central Bank of Trinidad and Tobago in consultation with the Bankers’ Association of Trinidad and Tobago (BATT) introduced the Residential Real Estate Mortgage Market Guideline in September 2011.

The Guideline has resulted in several benefits to the mortgage market, such as increased disclosure and transparency in mortgage rate setting, a better understanding by customers of their mortgage contracts and enhanced market competition.

The Guideline spells out an interest rate benchmark– the Mortgage Market Reference Rate (MMRR)– against which all residential mortgage rates are to be priced and re­‐priced.

This MMRR is computed by the Central Bank using the commercial banks’ funding costs as well as yields on applicable treasury bonds and is announced on the first business day in the months of March, June, September and December.

Commercial banks’ residential mortgage rates continued to trend downwards in June 2013. With the MMRR declining to 2.25 percent in June 2013 from 2.50 percent in March 2013, them weighted average rate on new residential mortgages fell to 5.58 percent in June 2013 from 5.91 per cent in March 2013.

Meanwhile, the weighted average rate on outstanding residential mortgages also dropped to 6.53 percent in June 2013 from 6.82 percent in March 2013. Lower mortgage rates have in part stimulated real estate mortgage demand, with robust growth (year-­on­year) in real estate mortgage loans during the first half of 2013.

There is an agreement between the Central Bank and the BATT that the MMRR will be reviewed at least once every three (3) years. Since the Guideline has been in effect for nearly twoyears, the Central Bank considers this to be an opportune time to undertake a
review of the MMRR methodology given the evolving nature of the financial sector.

The Central Bank will communicate to the public the outcome of this review upon its completion. The public is asked to note that the MMRR for September 2013 will be held at 2.25 percent. Commercial banks and their affiliated non-­bank financial institutions are expected to apply this rate to all existing residential mortgage loans that are due to be re-­priced as well as new mortgages from September 02, 2013.

Customers are also reminded that the MMRR is not the mortgage rate that will be charged by the commercial bank. The mortgage rate is equal to the MMRR plus a margin which is negotiated between the commercial bank and the customer. The margin takes into account the customer’s credit rating, the location of the property, the size of the down payment and the size and quality of
collateral to be used.

The next MMRR announcement is scheduled for December 2, 2013.


Courtesy the Central Bank of Trinidad and Tobago

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