By KEESHA BETHELL, Guardian Business Reporter

keesha@nasguard.com

Slumping market indicators like liquidity appear to be making it more difficult for prospective homeowners to win mortgages, say Bahamian analysts.

According to the managing director of Bank of The Bahamas International, Paul McWeeney, the assumption is based on the realities of the current economic climate and not on up-to-the-minute numbers from the industry.

"The Central Bank's statistics are not real time, therefore I don't have them," he said. But "because of the contradiction in system liquidity, naturally credit growth slows.

"Given that mortgage lending is a component of overall credit growth, you have to assume mortgage growth has slowed as well."

Indeed, the increased mortgage and short-term credit that marked much of 2005/2006 appears to have slowed. Mortgages are becoming harder to get despite relatively low rates at most lending institutions.

According to Rory Higgs at The Bahamas Mortgage Corporation, a dwindling number of applicants now meet debt-to-income requirements with fewer therefore qualifying for housing loans through his program.

The trend towards more conservative lending coupled with fewer borrowers holding the requisite downpayment suggests the red-hot housing market may be starting to cool, said one analyst.

A higher inflation rate - the International Monetary Fund predicting a 2.7 per cent hike for 2007 - is also likely to have a dampening effect on mortgage lending.That movement downward would seem to follow historical precedent given a similar drop in the US.

There, in the last three months of 2006, house sales fell in 40 states. The median price also declined in those major cities just coming off of a boom period.

Perhaps of most interest to our market and with the most impact was the falloff in Florida's housing market.

According to the National Association of Realtors in the US, housing sales in that state dropped more than 30 per cent in the last three months of last year.

Much of that loss was in holiday homes similar to those in this country.

The American indicator suggests that the US economy may, in fact, be headed for a mild recession, driven in part by uncertainty around the War in Iraq and the government's position.

While our own niche market is expected to remain relatively buoyant given its focus on high-income foreign buyers, the domestic mortgage industry will likely continue to follow the downward trend set by the US.

Analysts can only continue to speculate until the Central Bank releases its numbers, expected early next month.

But if those expert predictions are grounded in reality, the slump could spell bad news for an economy touted as the hottest in years.