PROVEN customers set to save this Christmas

By Lindsey Turnbull

Even though it is customary for Cayman banks to follow the US Federal Reserve Bank’s lead when it comes to interest rate movements, PROVEN Bank has announced it won’t be increasing rates on its variable rate loans (such as mortgages) until the New Year. This comes as the Fed raised interest rates by 0.5% last week and is likely to raise rates further in 2023, thereby pushing up the cost of borrowing.

While almost all Cayman banks have followed suit, PROVEN Bank said it was pausing interest rate increases on variable rate loans until 2023 to alleviate financial strain for customers around the holiday season. The hiatus will put around US$75 in the pocket of anyone with a PROVEN bank mortgage.

Ben Freeman, PROVEN Bank CEO, said they wanted their customers to enjoy a break this holiday given the compounding effect that inflation and rising interest rates had on gift giving associated with the season.

“We are not passing the increased costs on to customers during this time as we want to help keep holiday cheer for customers and our community, while minimising the impact of unexpected expenditures,” he confirmed.

Inflation rates were already high, Mr Freeman, so PROVEN Bank did not want to pass increased rate costs on to their customers. He indicated that the average savings would be close to US$75.

“We estimate that the overall programme will cost the bank between US$ 40k - $50k in benefits to our customers,” he stated.

Help is on hand

Anyone struggling to repay their mortgage should reach out to their bank immediately, he furthered, advising that banks would work with their customers to help them explore options during this time.

“One option may be to consolidate debt into a lower cost facility,” he said. “For example, you can consolidate auto loans, person loans and credit card loans into a secured facility like a mortgage to bring down the interest rate. For distressed situations - like health issues or loss of employment - the bank can consider modifying the terms of the loan, such as extending the loan period.”

Variable to fixed

Anyone looking to change their loan from a variable to a fixed rate need to go to the bank and talk the situation through with an expert, Mr Freeman advised.

“The bank will review the existing loan, update the customer’s financial situation and then modify the existing loan. The fixed interest rate period is up to 5 years. Typically, the fixed interest rate will be 1%-1.5% greater than Prime rate plus 1% (our variable rate pricing). After the fixed period, the rate reverts to a variable rate vs Prime rate,” he said.

Mr Freeman said the bank anticipated at least another 0.5% rate increase next year.

“This will bring Prime rate to 8%. However, the Federal Reserve has indicated that bringing down inflation is a key priority. There is no guarantee rate will not rise further,” he stated.

Ahead of the game

Mr Freeman acknowledged that they understood PROVEN Bank’s rate freeze for the holidays would not fix the hardships customers currently faced.

“The intention is to help customers to a have a bit more spending money and have one less thing to worry about over the holidays,” he confirmed. “I was hoping the other banks would follow our lead to offer broader relief in all the communities. PROVEN Bank may not be as large as the other banks but as a challenger bank, we can still lead by example.”

PROVEN Bank will resume the normal course of business in early January in accordance with the US Federal Reserve Bank. For further information regarding rates and payment terms, customers can call PROVEN Bank at (345) 949-7822.