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(CNS): Premier Wayne Panton is disappointed that the local high street banks have refused to delay implementing the latest interest rate hike, even though there is no need for them to keep pace with the US Federal Reserve. Interest rates have increased in the Cayman Islands ten times in just over a year, adding to the cost of living crisis that people are enduring.
In a statement about the situation issued Friday, Pantonwho is the minister of finance, said he had met with and written to the Cayman Islands Bankers Association (CIBA) twice over the past year to ask the local retail banks to hold off rolling out interest rate hikes to help homeowners and businesses. However, on both occasions, with the exception of one bank, they refused.
“Given this refusal, I would like to publicly register both my disappointment in their position to date and also my expectation that they will engage in further dialogue with government to determine how best to alleviate the impact of future rate increases,” Panton said in the statement.
Larger economies use interest rate hikes to control inflation, but increasing rates here has little effect on local prices because the rising cost of living is not driven by the local economy but by the jurisdiction’s dependence on imports and the sale of property to foreign investors and absentee owners.
“While local banks have historically immediately increased interest rates in tandem with rate hikes by the US Federal Reserve, which sets the “prime” or “base” interest rate for borrowing, there is no reason why this must be the case,” Panton said. “Indeed, banks in our fellow British Overseas Territory of Bermuda do not automatically increase their prime rate in tandem with US Federal Reserve increases.”
Concerned that the banks’ refusal to help mitigate the economic forces that Cayman has little control over, Panton said he hoped they would reconsider their position. He said he wants to see a 60-day delay on rolling out hikes when they happen and for the high street banks to re-examine the policy of automatically putting up interest rates as soon as the US Prime Rate goes up.
“Although my efforts in this respect have not yet met with success, I would like to assure the Caymanian public that the campaign does not end here,” the premier said. “The banks are insisting that their residential mortgage portfolios are not ‘degrading’; however, my colleagues and I are continually hearing from constituents that their mortgage payments have increased to an unsustainable degree, in some cases up to $1,000 or more per month. This is a huge increase that might negatively impact any family in these times.”
Worried that people could begin losing their homes, Panton said the Cayman Islands Government must guard against that, and Cabinet was considering other measures to help people get through this inflationary period. He said the CIG would endeavour to find other ways to alleviate the stress that the rising cost of living is creating. But in the absence of cooperation from the banks, he encouraged borrowers to investigate fixed-rate mortgage options and to maintain lines of communication with their lending institutions.
“There is hope on the horizon, as most economists predict that the current trend of increasing interest rates is nearing its peak, and rates should start falling soon,” he said. “Government recognises our responsibility to make every effort we can to mitigate the current cost of living crisis that is negatively impacting thousands of hard-working, diligent Caymanians.”
Earlier today, McKeeva Bush MP called into Radio Cayman’s For the Record to reveal that he had filed a private member’s motion asking the government to do something to stop the banks from increasing rates and to create a local financial institution that could control the rate that banks can charge on borrowing. The motion is expected to be debated when parliament resumes next month.
See Panton’s statement and his letter to CIBA in the CNS Library and below:
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