Brazilian mortgage lending defies higher interest rates

Brazilian mortgage lending defies higher interest rates

Despite double-digit interest rates, Brazilian mortgage lending continues to post impressive results, leading analysts to predict that 2022 will be the second highest ever. The key to the buoyant mortgage figures lies in competition between banks, all keen to offer the best rates to homebuyers.

Changes in interest rates

Over the last 18 months, the Brazilian benchmark for interest rates, the Selic, has gone up by nearly 600%. While at the beginning of 2021, it stood at around 2%, its current rate stands at 13.75%.

However, Brazilian mortgage lending has resisted the double-digit surge thanks to the strong competition among banks. Most financial entities have been keen to keep their mortgage rates in single digits to motivate buyers.

As a result, loan rates are considerably lower than the official Selic. In August, banks offered mortgage interest at around 9.33%, just 2.5% more than a year ago and 4.4% below the Selic.

No sign of double-digit rates at banks

According to the mortgage comparison site, MelhorTaxa, banks are looking to remain below double-digit interest rates. They last adjusted them in June, although the change had minimal effects and average mortgages rose by just 0.04%.

The Coordinator of MelhorTaxa, Priscilla Basso, believes there may be a further increase later this year, but does not expect it to take rates to over 10%. Bankers tend to agree with this analysis.

According to the Director of Loans at Bradesco, Romero Gomes de Albuquerque, “banks see mortgage loans as a strategic product and are keen to include it in their balance books”. He too believes double-digit rates for Brazilian mortgage lending are a possibility this year but hopes that “there’s no need to reach that point”.

Record Brazilian mortgage lending

The single-digit rates at banks help explain the buoyancy in mortgage figures so far this year. In the first six months of 2022, homebuyers took out loans to the tune of R$113 billion, the second highest in history after 2021.

On the back of these figures, the President of the Brazilian Mortgage Association (ABECIP), José Ramos Rocha Neto, believes 2022 will be one of the best years ever for lending. “We expect to reach almost R$250 billion by the end of this year,” he said.

Figures from the banks themselves echo this optimism. For example, Itaú bank approved loans for R$18.8 billion between January and July, 45% higher than the entire amount for 2019.

(Source: ABECIP)