Opposition Spokesperson on Housing, Infrastructure and Transport, Robert Pickersgill on Tuesday, lashed the Government for increasing the interest rates on mortgages to borrowers from the National Housing Trust.

Supporting the call by the Leader of the Opposition who called for the interest rates on NHT loans not to be increased, a measure which the Prime Minister announced in his presentation in the Budget Debate, Mr. Pickersgill stated that the reasons advanced by the Prime Minister were not valid.

Mr. Pickersgill quoted The Prime Minister's justification for the increases when the Prime Minister stated in his contribution to the Budget Debate said:

"Between 2000 and 2008, the average return on mortgages has been cut in half from 8.2% in 2000 to 4.2% in 2007. But the cost of funds to the NHT is 4.2%! There is no     properly run lending institution that can lend money at the same rate that it costs to get the money to lend. It will  not be able to meet its operational expenses. Its reserves will eventually be  wiped out!"

But, Mr. Pickersgill went on to state:

"Even if we accept the Prime Minister's arguments on the cost of funds and average return on mortgages, what he fails to point out that there is other income earned by the Trust on its accumulated reserves which is almost equal to its return on mortgages.

For the financial year ended March 2007, the audited financial statements show that 2.6 billion dollars of the NHT's revenue or approximately 46 per cent - nearly one half - comes from interest on investments. His failure to point out this fact shows a selective approach to determining a company's financial condition."

NHT not Insolvent or Bankrupt

Citing the audited financial statements of the NHT for the financial year ended March 31, 2007, Mr. Pickersgill said that the suggestion that the NHT is insolvent or bankrupt is not supported by the facts.

Mr. Pickersgill pointed out that: "A review of the NHT's Balance sheet for the financial year ending March 31, 2007 reveals that the Trust had total assets of    $ 89 Billion and Total Liabilities of $ 34.6 Billion resulting in an excess of Assets over Liabilities of $ 54.4 Billion

Continuing, Mr. Pickersgill stated that based on detailed analysis  " it is reasonable to conclude that the National Housing Trust is neither balance sheet nor cash flow insolvent nor is it bankrupt as some try to make out and further, based on benchmarks of institutions of this type has an enviably robust balance sheet and overall a healthy financial condition".

Mr. Pickersgill further pointed out that the increase in the interest rates to what is referred to as the ‘higher income bands"   does not mean ‘high income' but that it includes "our young professionals, junior managers, our teachers, our policemen, our nurses, and our civil servants".

He said that the Opposition "condemn the increase in interest rates to the contributors of the NHT who have obtained mortgages, at a time when they are experiencing additional burdens owing to the spiralling increases in the cost of food and other basic items".

Mr. Pickersgill went on further to state that "when the Honourable Michael Manley and the Government of the People's National Party established the National Housing Trust in 1976, the focus was not on creating a corporate building society where the main criteria to assess performance was the state of the balance sheet.

"By virtue of its mandate", he said, the NHT is required to "balance its books while it balances people's lives"

Peril Insurance

Mr. Pickersgill also voiced strong opposition to another cost saving measure announced by the NHT that of the phased increase in insurance premiums charged to mortgagors to seventy per cent of market rate over a four year period starting April 1, 2008.

He advised that the Opposition was "seriously concerned about this move since the net effect is to pass on to the NHT borrower a significant portion of the insurance premium at market rates - again adding to their burden."

He also suggested that while the "Prime Minister promised that the mortgage rates of the lower income bands - the two per cent and four per cent rates - would not be increased, he is in fact actually increased their monthly payment to the NHT by hitting them with an increase in the insurance premium on their property."

The Opposition Spokesperson on Housing outlined the self-insurance scheme which was adopted by the NHT in 2002 through the establishment of a Peril Reserve which he claims  resulted in a significant reduction in the level of premium paid by the NHT to its commercial underwriters and also resulted in a lower premium being paid by the NHT borrower.

Mr. Pickersgill described the measure unfair and unjust to the NHT borrower and urged that the Peril Reserve be maintained to cushion the full extent of the insurance premium paid by the borrowers from the NHT.

Contact: Robert Pickersgill
Opposition Spokesperson on Housing, Infrastructure and Transport
Phone: 978-1337
Email: