At least one local bank has adopted the costly practice of penalizing clients thousands of dollars for paying off their mortgage.
The government allows mortgage holders to transfer their mortgage from one financial institution to another, with a better interest rate, without paying stamp duty or Value added tax (VAT) on the mortgage transfer. However, banks like CIBC FirstCaribbean are making this process more difficult and expensive by requiring clients to give them six months notice or six months interest in lieu of notice if they want to pay off their mortgage.
This tactic dissuades mortgage holders from shopping around to find the best mortgage rate from other banks.
Before the mortgage rate dropped to make lending institutions more competitive, banks had a two-month clause, where clients were required to give two months notice before paying off their mortgage.
However, amid a mortgage rate war, CIBC FirstCaribbean increased the notice period to an unconscionable six months to collect more interest and reduce the chance of clients moving to another bank.
In 2015, then-Prime Minister Perry Christie accused lending institutions of breeding a culture of “modern day economic slaves”.
“Banks and other lending institutions are getting richer, particularly with the excessive interest rates that are being charged by some. It is turning too many people in our country into, what I characterise while I am making the point, into modern day slaves.”
“Indeed with the prevalence of salary deductions you have a whole bunch of folks who are taking home literally just a few dollars every month, hardly enough to feed their families, to keep the lights on and keep the water running. The rest of what they earn is going towards personal debt service,” he added.