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The Brazilian mortgage market continues to evolve with more consumer-friendly products. The latest offering comes from the Caixa Economica Federal and offers a fixed interest rate. Analysts believe it will open up the property market in Brazil considerably.

New product

One of the challenges facing Brazilians when looking for a mortgage comes in the country’s interest rates. Although they’re currently at their lowest (3.75% in March), they’re higher than in most countries espcially when applied to mortgages. The latest offering on the Brazilian mortgage market therefore comes as a breath of fresh air.
The Caixa Economica Federal has just launched a fixed-rate mortgage. Interest will be range from 8% to 9.75% for the entire duration of the loan. Typical loan terms available for the new mortgage are from 20 to 30 years. Preferential customers will benefit from the lower interest rate with the highest for new clients.

Good news for consumers

The new product offers several advantages to buyers of Brazilian property. First and foremost, buyers will be able to budget for mortgage repayments for the duration of the loan. ““The new product allows people to know from day one exactly how much they’re paying,” said Pedro Guimaraes, President of the Caixa.
The bank also pointed out that the product passes inflation considerations to the bank rather than the client. Buyers no longer have to factor inflation into their mortgage repayments because of the fixed rate.
In addition, the new mortgage is available for both new and resale properties. This gives buyers the chance to tap into the either market. Plus they can benefit from up to 80% loan-to-value terms.

Opening up Brazilian mortgage market

The new product adds welcome choice to the mortgage market in Brazil. The sector is growing rapidly, but still lacks the variety seen in other countries such as the US. The Caixa has earmarked R$10 billion for the new credit line, which many analysts believe will open up the market.
According to Jose Carlos Gama, President of the Civil Construction Union in Ceará, Northeast Brazil (Sinduscon-CE), the move will stimulate the market. He expects a big impact and believes “construction companies will be motivated to launch new products.”

New supply of property in Ceará

Gama also thinks the Caixa fixed-rate mortgage will also affect the supply of new property in Ceará. Data from Sinduscon-CE puts the number of units currently on the market in Fortaleza at 8,500. This figure has fallen from 13,000 since 2016.
This area of Northeast Brazil currently suffers from a shortage of new property with new products in high demand. This is particularly true of high-end homes in desirable locations.

Record profits in booming market

The Caixa announced the new product for the Brazilian mortgage market on the back of record profits in 2019. Net income from home loans for the bank reached R$21.1 billion last year. This presents an increase of 103.3% on 2018 and a clear sign of the buoyancy in the Brazilian property sector.
BRIC Group believes many Brazilian buyers will take advantage of the new fixed-rate mortgage. Its terms are highly favourable and open up the market for second homes as well as permanent residences.
(Source: Diario do Nordeste)

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