Housing credit below benchmark interest rate favors financing
The average rate of housing credit will remain below the Selic, Brazil’s benchmark interest rate, at least until the Central Bank starts an easing cycle, experts told Valor. Competition between financial firms, and the banks’ obligation to direct funds from savings accounts to this segment, has cushioned contracts from Selic hikes.The average nominal rate of mortgage loans of Brazil’s five largest banks stood at 9.33% at the beginning of the second half of March, right after the Selic was raised to 11.75% a year, a survey by Melhor Taxa, a comparison platform, shows. The Central Bank signaled that the Selic will be raised to 12.75% a year in May.The interest rates for housing credit had been rising since the beginning of the tightening cycle and remained above the benchmark interest rate until the beginning of the year. After that, they came to a standstill."Historically, when the benchmark rate is at double-digit levels, the average cost of bank loans of this kind tends to stay below the Selic," said Paulo Chebat, CEO of Melhor Taxa. "This happens because a very high cost can make financing unviable."As Brazil grapples with sluggish economic growth and high levels of household indebtedness, there is little room for adjustments as banks compete fiercely for clients."Financial firms still have a great appetite for the product this year," said José Ramos Rocha Neto, head of mortgage lender association Abecip and Bradesco’s executive director. According to him, competition has helped to hold off adjustments. "The Selic rate is now at 11.75% from 2% in February of last year. But the average rate of home loans went to about 9.5% plus the reference rate from 6.9% plus the reference rate," he added, citing the rate known as TR, which adjusts savings accounts.According to data by Melhor Taxa, the last time the Selic was above 11%, in April 2017, when monetary policy interest was at 11.25% per year, the average home loan rate of the five largest banks stood at 10.63%. The environment of increased competition and interest from financial firms in providing housing credit seems to be holding back additional hikes.Between the end of November and now, the Selic rate has risen 250 basis points to 11.75%. The average rate for housing credit rose to 9.33% from 9.21%.This means that, at the moment, there is a spread of 2.42 percentage points, or 26%, between the cost of housing credit and the benchmark interest rate, which defines, for example, the...
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