Brazil mortgage market ‘has great growth potential’
Recent media reports have forecasted growth in Brazil’s mortgage market, which, being only two years in the making, has great potential for development.
The first 25-year mortgage became available in the country on October 15th 2007, offered by Santander.
Prior to that, banks were not able to offer the kind of loans for purchasing property in Brazil that we are used to seeing in the UK and, as a result, the mortgage market in the country comprises just two per cent of the financial sector, compared to the US or the UK, were the percentage stands at around 70 per cent.
Maria Fernanda Ramos Coehlo, chief executive of state-owned Caixa Economica Federal, the South American country’s largest mortgage lender, recently told Reuters that the bank expects “good growth” in loans for Brazil real estate purchase in 2010, on the back of booming demand for low-income housing.
The bank has lent around 19 billion reais (£6.3 billion) so far in 2009, compared to an average of five billion reais four years ago.
It expects to lend 26 billion reais worth of loans for Brazil real estate purchase this year, an estimate which has been revised upwards from an original prediction of 22 billion reais as demand for the government’s Minha Casa, Minha Vida (My Home, My Life) scheme grows, according to Reuters.
Overall lending by Brazilian banks rose by 1.3 per cent in June, compared to the previous month, with loans for property purchase contributing significantly to this rise.
The value of loans authorised by banks rose from 1.26 trillion reais in May, constituting a year-on-year increase of 19.7 per cent.
According to data from the Brazilian Institute of Geography and Statistics, between June 2008 and May 2009 funding for new housing amounted to $29.95 billion (£18 billion), with loans handed out on 295,777 units.
This compares to $21.73 billion worth of loans handed out on 223,854 units between June 2007 and May 2008, representing a 37.86 per cent rise in nominal value of lending and a 32.13 per cent increase in the number of homes financed.
John Broad, sales director at Brazilian property firm Grup Immobiliari Natal, echoed Mr Coehlo’s belief that the market for home loans is on the up.
“Mortgages are still coming along slowly. There are more mortgage products available now, but they’re still around eight, nine, ten per cent interest,” he explained.
“The one that is very interesting now is for the social housing, because you can get mortgages as low as 4.5 per cent for those,” he added.
One thing which could help to bring down the cost of mortgages in the country is the continuing reduction in interest rates, which are at a record low at the moment.
The central bank has reduced the Selic rate from 13.75 per cent in December to its current 8.75 per cent level and president Luiz Inacio Lula da Silva has promised that policymakers will make further cuts if needs be.
He said it was “desirable and possible” for interest rates to be lowered further.
Mr Broad suggested that these cuts could have an effect on the mortgage market.
“The banks are very, very eager to lend money. The mortgage market [in Brazil] is a tiny fraction of the UK and the US so they’re trying to get people to take out loans,” he revealed.
“I’m sure the interest rates are going to help the price of mortgages come down,” he added.
