NASSAU, BAHAMAS — Consumer loan applications approved by commercial banks saw a 15 percent increase compared to the first half of the year in 2023, according to the latest Bank Lending Conditions Survey by the Central Bank, which also revealed that residential mortgage applications decreased further by 25.5 percent year-on-year.
The Bank Lending Conditions Survey (BLCS) contains 12 questions on lending to the private sector, seeking information on the number of loan applications received, approved, and denied, and therefore provides a perspective on the demand for credit. In addition, banks are also asked about their views on changes in lending conditions from one quarter to the next.
According to the Central Bank’s latest survey of commercial banks, over the first half of 2024, bank lending conditions continued to improve as the demand for credit strengthened compared to the same period in 2023. “In particular, total applications received grew, owing to increases in consumer loan requests. In addition, approval rates on loan applications trended upwards. With regard to denials, the main reasons cited by lending institutions were “other miscellaneous” factors, high debt service ratio (DSR), insufficient time on the job, and underemployment,” according to the Central Bank.
According to the regulator, total loan applications received were 17,118, up 7.7 percent vis-à-vis the six months to June 2023. Applications approved were 13,764, up 15.1 percent relative to June 2023. The loan approval stood at 80.4 percent. Loan denials were 1,533, down 37.4 percent since June 2023. Among other reasons for loan denials were high debt service ratios and insufficient time on the job.
Comprising 91.7 percent of loan applications, consumer lending continued to be the most dominant credit component. Requests grew by 10.0 percent year-on-year (for the six months to June 2024 over the same period in 2023), due to growth in applications received from New Providence (13.6 percent) and the Family of Islands (9.3 percent). Conversely, demand from Grand Bahama decreased by 12.3 percent. Of the 15,691 consumer loan applications received, requests were mainly for “other” miscellaneous purposes (26.1 percent), consolidation of debt (24.0 percent), credit cards (21.7 percent), and travel (11.8 percent).
Year-on-year, the number of approved loan applications advanced by 14.5 percent after rising by 4.5 percent last year, while the average approval rate moved higher by 3.3 percentage points to 81.3 percent. In terms of loan denials, 9.2 percent of consumer financing requests were rejected, with frequently cited reasons such as “other miscellaneous” factors (52.8 percent)—which includes low credit scores, purposes outside of banks’ policy, and low-risk ratings—high debt service ratios (28.5 percent), delinquency in prior loans (7.4 percent), and insufficient time on the job (4.8 percent).
Over the first half of 2024, respondent banks received 793 residential mortgage applications, constituting 98.3 percent of the total mortgage applications received. “Residential mortgage applications decreased further by 25.5 percent year-on-year, following the 7.6 percent decline a year earlier. Reductions were documented for all three major categories: new construction (49.1 percent), rehabilitations and additions (23.8 percent), and existing dwellings (8.7 percent),” the Central Bank reported.
Of the applications received, financing sought against existing residential dwellings represented 41.4 percent of mortgage demand, while rehabilitations and additions and mortgages for new construction accounted for 38.8 percent and 18.1 percent, respectively. Moreover, commercial financing applications constituted just 1.7 percent of requests.
Analysis by island revealed that mortgage applications processed in New Providence fell by 29.3 percent and in the Family of Islands by 36.8 percent. In contrast, demand increased in Grand Bahama by 13.2 percent. Nevertheless, total mortgage applications recorded an approval rate of 54.3 percent in the first half of 2024, an increase of 22.1 percentage points compared to the same period last year. Specifically, the approval rate for renovation projects was 10.2 percent, while support for new construction and existing dwelling requests were 63.7 percent and 91.6 percent, respectively. Further, commercial mortgages registered an approval rate of 50.0 percent.
Of the total number of requests, 7.4 percent of mortgage applications were denied. Primary reasons included “other miscellaneous” factors, which accounted for 63.3 percent of denials, higher debt service ratios—which exceeded the revised threshold of 50.0 percent—(16.7 percent), and underemployment (10.0 percent). Further, applications were also denied on account of delinquency in prior loans (3.3 percent), insufficient time on the job (3.3 percent), inability to verify income (1.7 percent), and no down payment (1.7 percent).
Lending institutions received 620 applications for commercial financing in the six months to June 2024, a gain of 18.3 percent year-on-year. This more than reversed a 1.5 percent falloff in the year prior, amid strong demand in the New Providence and the Family of Islands markets. In June 2024, the average approval rate for commercial applications rose by 4.2 percentage points to 90.8 percent, relative to the same period in 2023.
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