Susan Gordon, Business Reporter

Gladstone Whitelocke, general manager of Scotia Jamaica Building Society, says 11 per cent mortgage offer to university graduates in the public sector unlikely to be extended. - File

Scotiabank will not extend its low- interest mortgage offer after the $500 million pool of funds is exhausted, the company has indicated.

"It was a one-off offer," said Gladstone Whitelocke, general manager for Scotia Jamaica Building Society (SJBS).

Four months into the special mortgage window, opened to public-sector workers only, some 25 per cent of the $500 million fund had been subscribed, said Scotia.

Secured mortgage

In a highly competitive mortgage market which is now offering 100 per cent mortgage financing, SJBS in April said it had secured 15 mortgages from the initiative.

In January 2007, SJBS began offering university graduates who were working in the public sector for three years and more and also first-time homeowners, loans at 11 per cent interest on mortgages of $500,000 and over. The loans were capped at $10 million.

The mortgages are also offered at 95 per cent financing.

The initiative was announced last year by Scotiabank president and chief executive officer William 'Bill' Clarke as a gift to the public sector, in commemoration of the bank's 100 years of doing business with government and related services.

Although the 11 per cent rate was 1.9 per cent below mortgage sales at competing building societies, the loan is fixed only for five years. Thereafter, a variable rate will apply.

The maximum mortgage period is 30 years.

The $500 million in the fund, according to Whitelocke, was sourced not from the profits of Scotiabank, but from its portfolio of deposits.

Special mortgage rates

Generally, SJBS offers tiered mortgage rates of between 13.25 and 15.25 per cent.

"It is our way of giving back to the public," said Whitelocke of the special fund.

Mortgage loans issued under the fund have averaged $6 million per applicant, but the SJBS boss added that based on the swift movement in real-estate prices, it could move to the $10 million cap.

Though he declined to state the precise effect of the low mortgages on the business, Whitelocke suggested it was negative.

"Naturally, the special initiative would have an impact on our profitability," he said.

"You could make more money if you offered loans at higher interest rates."

susan.gordon@gleanerjm.com