HAMILTON, Bermuda – Bermuda's government has entered into an agreement with local banks that is intended to address the acute housing shortage on the island as well as further stimulate economic growth.
Premier David Burt, flanked by banking officials, addressing ceremony (CMC Photo)Premier David Burt, speaking at the signing of the Memorandum of Understansding (MoU) with the Bermuda Bankers Association (BBA), said that the initiative forms part of the “Approved Residential Scheme Kickstart Programme” that was established in June 2022, to increase the stock of available housing units, stimulate growth within the Island’s three economic empowerment zones, as well as addressing economic inequality, and empower entrepreneurs.
“We are pleased to announce the launch of the Approved Residential Scheme ‘Kickstart’ programme, which will offer investors and developers a reduction in local borrowing rates for large-scale residential and mixed-use properties that meet the appropriate guidelines.
“Under this initiative, the government will provide an aggregate US$50 million government guarantee to support Approved Residential Scheme opportunities within the economic empowerment zones.”
Burt said in return for the reduced risk, participating banks, which include HSBC Bermuda, Clarien Bank, and Bermuda Commercial Bank, have committed to offer a preferred interest rate to eligible applicants.
He said the agreed terms within the MOU “represent a collaborative effort between the government and the participating banks to achieve our overall objective of increasing affordable housing, further spurring construction activity, which will provide more jobs and build on our Economic Development Strategy”
According to Burt, the key terms of the MoU include total aggregate limit is not to exceed US$50 million, any additional exposure would be subject to the agreement of the governmentand that a government guarantee shall remain in place until the expiry of six years following completion of the construction period.
He said as with the Mortgage Guarantee Programme, the government will not have any involvement and/or influence on the banks’ credit underwriting or enforcement decisions participating banks will determine the discounted interest rates.
“As the size and scope of the potential development projects can vary, there is no agreed set interest rate; however, each bank has agreed to offer a discounted rate, which will help to materially reduce the cost of development, Burt said, praising the particapating banks
for their efforts in working with the government “with this programme, which we believe will support our economic growth”.
The BBA’s chief executive officer, Geoff Scott, said the government’s “unconditional guarantee” would allow lenders to offer lower interest rates.
“It won’t make an unbankable project bankable,” he said, adding that each bank would evaluate loans on their own merits.
Scott said banks had agreed to a scheme that would promote economic development and growth for the island, and “bring down the cost of borrowing while still maintaining competition between banks”.
In the budget presentation earlier this year, Premier Burt had announced a US10 million grant increase for the Bermuda Housing Corporation to boost affordable housing, on top of the $15 million that had already been allocated.
