By INDERIA SAUNDERS, Guardian Business Reporter

The head of the Bahamas Contractors Association is challenging banks in The Bahamas to offer a moratorium on mortgage payments during the economic downturn, billing the move as the best way to curb the skyrocketing rate of non-performing loans.

"If people can have a moratorium on their mortgage and just pay interest rates, it will cut their payments in half," BCA President Stephen Wrinkle told Guardian Business. "This way they will have more money to pay their light bills and water bills."

Most importantly, he said customers would not have to default on their loan payments, hence racking up late payments and bad credit in the process. The head contractor's statements come on the heels of a Central Bank report acknowledging that there has been an increase in the level of non-performing loans, which at August's end stood at 10.7 percent of total loans across the sector. That's compared to the 9.2 percent for December 31, 2007.

"The impact of the economic slowing has been most pronounced on the commercial sector, whose operations have been adversely affected by increased operating costs and reduced revenues; and an increasing number of loans are now more than three months in payments arrears," the Bank said. "This situation is likely to continue in the near-term, until the economic situation shows renewed signs of improvement."

It's reason enough, argues Wrinkle, for banks to re-organize borrower payments for retail customers grappling with static or dwindling incomes even as the cost of living rises. The best barometer of that - the consumer price index - stood at 3.29 percent at the year-long period ending July. The figure is almost a full percentage point above the year-ago period and has outstripped IMF projections.

As he sees it, Bahamian customers — embarrassed to have fallen behind in payments — won't likely come into the banks looking for the kind of moratorium some of their counterparts in the U.S. are now offering beleaguered customers. Wrinkle asserts it is Bahamian bankers, themselves, who must offer that olive branch. "It's the only solution for homeowners," he said. "It gets cash circulating in the economy again."

It is worth noting that many local banks have, in fact, already indicated renewed willingness to re-negotiate terms with troubled clients, if only to avoid the expenses attached to seizing property and trying to find buyers in the current market. It's one where even the Central Bank is cautioning consumers against taking on unnecessary spending.

"All non-essential outlays and the taking on of new debt should be minimized or even deferred," reads a Bank paper specifically addressing the global credit crisis.

That upset has hit The Bahamas housing market, given the falloff in our tourism industry as well as investment and the inevitable effect on local wages.

In an earlier interview with Guardian Business, Wrinkle suggested this country may ultimately experience the kind of slump in demand for housing as in the U.S. and increasingly across the developed world.

"Mark my words, it's coming," he said early this year. "The poor homeowner has no means of making any more money and they entered into their mortgages with the premise that things would remain relatively stable.

"What's happened is the opposite. It's a recipe for disaster and if people don't take their heads out of the sand and see what's coming, there is going to be an economic meltdown in this country."

Wrinkle is now suggesting his sector's unemployment rate is hovering at a damaging 20 percent. According to him, many contractors and workers are still waiting for the government to green light a number of anchor projects.