According to the Bank of Jamaica’s newly released Credit Conditions Survey report, lenders plan to increase interest rates on new local currency loans by 15 basis points in the March quarter and another 70 basis points in the June 2025 quarter. This collective 85 basis point expected rise would result in an average lending rate of 16.74 per cent interest by June 2025.

The Bank of Jamaica’s Expectations

• Commercial banks are expected to increase lending rates across the board
• Consumer credit or personal loans are expected to rise by 23 basis points to 23.36 per cent
• Overall average rate is expected to increase by 6 basis points to 12.18 per cent

The survey, conducted in January and February, interviewed 22 institutions and is designed to elicit qualitative information on changes in the demand and supply of credit to various types of businesses and individuals. The report noted that the planned increases reflect lenders’ risk appetite and reversion to normal rates at the end of their loan promotional activities.

Counter to Central Bank Signals

The planned increases buck the signal coming from the central bank, which has cut rates five times in increments of 25 basis points since the summer of 2024, bringing the policy interest rate down from 7.0 per cent to 5.75 per cent. BOJ Governor Richard Byles had appealed to lenders to give their clients a break by adjusting the terms on fixed loans issued when interest rates were elevated.

Despite this, lenders plan to increase interest rates, with personal credit expected to rise 68 basis points from 17.36 per cent to 18.04 per cent, and business loans by 90 basis points from 15.52 per cent to 16.42 per cent.

Index of Overall Credit Conditions

1. Overall Credit Demand Index (CDI) rose to 102.3 points from 96.1 points, reflecting an increase in demand.
2. CDI for microbusinesses was 114.0 points and small businesses 105.8 points, showing particularly sharp increases.
3. Large businesses were more cautious at 98.3 CDI, reflecting a reduction in loan demand.

The survey also projects new local currency loan rates will increase, on average, by 85 basis points over two quarters to 16.74 per cent across financial institutions. The decline in large business loan demand was reflected in the industries of agriculture and fishing; mining and quarrying; tourism and professional and other services; electricity, gas and water; and entertainment.

Industry Implications

“For the June 2025 quarter, lenders expect demand for credit by large-sized businesses to decline. The anticipated reduction is reflected in the demand for local currency loans, while the demand for foreign currency loans is expected to remain unchanged.”

The decline in demand for large business loans was reflected in the industries of agriculture and fishing; mining and quarrying; tourism and professional and other services; electricity, gas and water; and entertainment. The decline in demand for foreign currency loans was reflected in all industries except for manufacturing, which was unchanged.

Overall, the survey suggests that interest rates are expected to stay elevated for now, despite the central bank’s efforts to cut rates.

Interest Rate Expectations

Among the loan categories, personal credit is expected to rise 68 basis points from 17.36 per cent to 18.04 per cent, and business loans by 90 basis points from 15.52 per cent to 16.42 per cent. The survey also creates an index of overall credit conditions, which rose to 102.3 points from 96.1 points, reflecting an increase in demand.

What Borrowers Should Expect

Borrowers should prepare for elevated interest rates, with personal credit expected to rise 68 basis points from 17.36 per cent to 18.04 per cent, and business loans by 90 basis points from 15.52 per cent to 16.42 per cent. The average lending rate is expected to increase to 16.74 per cent interest by June 2025.

Overall, the survey suggests that interest rates are expected to stay elevated for now, despite the central bank’s efforts to cut rates.