The historic low in Brazilian interest rates since mid-2017 has sparked fierce competition among banks striving to attract clients. As a result, analysts expect the Brazilian property market to see supply drop dramatically by the end of this year.
Interest rates in Brazil currently stand at their lowest ever. The SELIC rate, set by the Brazilian Central Bank, fell to 6.5% earlier this year. It has caused a ripple effect throughout the mortgage market with banks across Brazil offering clients more favourable rates and conditions.
Mortgage competition in the Brazilian property market
The Caixa Economica Federal, the largest mortgage provider in Brazil, has announced a reduction in its mortgage interest rates. For properties valued up to R$800,000 the bank is offering a base rate of 9%. Homes with a higher value have a slightly higher rate of 10%.
In tandem with this, the Caixa has introduced more advantageous conditions for those thinking of buying a property. Loan-to-value (LTV) has risen considerably. New-build properties now have an LTV of 80% while mortgages for resale homes can reach 70% LTV. Buyers previously required a deposit of 50%.
The combination of lower interest rates and deposit offered by the Caixa will undoubtedly boost the Brazilian property market, particularly when the bank provides 70% of all mortgages in the country. “The drop in mortgage rates is nothing but healthy for the market since the Caixa is the largest provider,” said Pedro Seixas, a researcher at the nationwide research institute Fundaçao Gertulio Vargas, quoted in the Diario do Nordeste broadsheet.
Santander Bank joins new rate offers
The latest drop in rates by the Caixa brings them to the lowest on the market along with Itáu Bank. However, other banks have taken note and in the case of the Santander, joined in with new rate offers.
At the end of April, the bank announced the introduction of new mortgage interest rates until August. For properties priced up to R$800,000 the bank is offering a base rate of 9.49%. Financing is available for homes priced from R$60,000 and for a maximum of 35 years.
Although it doesn’t offer the lowest rates on the market, Santander is a keen contender for the very attractive mortgage market in Brazil. The bank lent a total of R$29.12 billion in the first three months of this year, up 7.6% on 2017.
14th Edition of the Caixa Property Exhibition
May heralds the start of the Caixa Property Exhibitions, held across the country on an annual basis. This year sees the 14th edition, an event where developers and estate agents showcase the latest on the Brazilian property market.
The event takes place in Fortaleza, Ceará between 25 and 27 May when a total of 6,400 properties will be available for purchase. Buyers have the option of the new favourable mortgage conditions offered by the Caixa.
Lower interest rates and improved economic conditions appear to be having a very positive effect on the Brazilian property market as a whole. According to the national mortgage association (ABECIP in Brazilian), house prices rose across the board in Q1 this year by 0.24%, indicating a stable market.
(Sources: ACEBIP, Diario do Nordeste)