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Dollar rise: unexpected consequences for mortgage loans - La Nacion Propiedades
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Suba del dólar: las consecuencias inesperadas en los créditos hipotecarios
En los últimos días, el MEP subió más del 10% y complica a los posibles tomadores de los préstamos hipotecarios
www.lanacion.com.ar
April 10, 2025
In recent days, the MEP has risen more than 10%, complicating matters for potential mortgage borrowers.
By Candela Contreras
The dollar's surge worries mortgage borrowers.Shutterstock
In recent months , mortgage loans had begun to gain greater prominence thanks to a context of relative exchange rate stability and wages in pesos, which , at least nominally, were rising faster than the value of real estate per square meter in dollars: in January 2025, the wage index increased 2.9% monthly —according to INDEC data—against the value of square meters, which increased 0.6% in the same month —according to Zonaprop. This distinction is important because it should not be forgotten that in Argentina, real estate is sold in dollars, but bank loans are granted in pesos and are adjusted monthly in UVA (UVAs).
But this balance was fragile . In the last month, the MEP dollar —the exchange rate used in mortgage loan transactions— rose more than 10%, leaving many who were about to sign out of the loop because banks take between 30 and 40 days from the time the loan is requested until the money is released . One specific case is that of a person who had already secured the property they were going to buy with a loan and, due to the increase, backed out of the transaction.
Most lenders will finance up to 75% of the property's total value in pesos , as long as the down payment doesn't exceed 25% of the applicant's income. Therefore, when the dollar rises , more pesos are needed to purchase the same property , and consequently, the down payment represents a higher percentage of the salary, making it impossible for people who previously qualified to do so.
An alternative for those left out by the increase in the installment due to currency fluctuations is to increase the advance payment in dollars . Banks require 25%, but one way out is to pay more upfront so that the remaining amount to be financed in pesos is less. It's worth clarifying, though, that " not everyone has that kind of money under their mattress ."
“ Mortgage lending was sustained by the stability of the dollar . As soon as the MEP moved, the equation broke,” summarizes Federico González Rouco, an economist specializing in housing. Added to this are two additional factors: rising mortgage rates (not just those offered—currently at an average of 7.5%—but primarily those contracted—5.6% on average) and an increase in the value per square meter . The combination makes loans more expensive and requires more income or more saved dollars .
Without overlooking the current global context, which generates uncertainty about the potential impact on the local economy. “ Global or regional uncertainty tends to trigger demand for dollars , which further complicates any local currency credit scheme tied to the dollar, such as mortgage lenders, which tend to use the MEP (Mexican Public Credit) to access dollars immediately to purchase a property,” explains Alan Daitch, CEO of Tasa Tasa.
It should be noted that properties are sold in dollars, but loans are granted in pesos.Daenin - Shutterstock
The effect of the dollar on credits
When the dollar remains stable and the value of properties in dollars doesn't fluctuate much, salaries in pesos can gain some ground in relative terms. That is, it takes less and less salary (or fewer dollars) to afford a property. But when the dollar rises, everything changes .
"Since the value of a square meter is in dollars, a 10% jump in the exchange rate means that, in pesos, that square meter costs 10% more . The problem is that banks aren't lending more, so that extra 10% has to be covered by the buyer: either they have a higher salary or they have more dollars saved. Neither is easy to achieve," says the economist from the consulting firm Empiria.
Daitch agrees: " The increase in the MEP is combined with the increase in the square meter (due to expectations or inflation) and with the increase in the cost of the installment. If rates rise, then the income needed to qualify also increases . It's a domino effect that can leave many people out."
Could the rise in the MEP leave you without credit, even if you already had part of the money committed? The answer is yes . “If the gap between what the bank gives you and what you need suddenly widens due to the rise in the MEP dollar, you could end up short . It's a real risk that is accentuated by these types of price increases ,” says the CEO of Tasa Tasa. He adds: “With the MEP increase and a salary increase that is unclear whether it will continue, the window for credit as a good alternative is at risk of closing . We would return to a logic where access is more conditioned by access to the dollar than by the ability to pay in pesos. It becomes more elitist, to a certain extent.”
While this is a time when prospective policyholders need to be more attentive to changes in the local economy, Daitch says, " It's still too early to know if this wasn't just a blip and revenues can continue to recover ."
The rise of the MEP dollar could leave a person without a mortgage loan.Shutterstock
The impact of the rate hike
At the same time, interest rates also rose . Not only those advertised by banks, but also the average contracted rate , which has been increasing at a rate of 0.2 percentage points per month. Currently, it stands at around 5.6% effective annual rate, although Banco Nación, which maintains a rate of 4.5%, has a significant market share due to its competitiveness. "It is the one attracting the most applications because it has one of the most competitive rates in the system," experts agree.
However, analysts agree that the rate is not the main obstacle today . "If the rate rises, you can change banks or adjust the term. It's not easy, but there are tools. The problem is when the dollar moves : that's a factor that can directly undermine credit," says González Rouco.
“ Mortgage lending is very sensitive to equilibrium . These are operations at the limit: we're not talking about people with excess income, but rather people who are keeping very tight accounts. When that equilibrium is broken, demand immediately shrinks ,” explains the economist.
But, in addition to the increase in average contracted rates, the rates offered by banks also rose: of the 24 banks that offer mortgage loans, 12 decided to raise them , further increasing the cost of housing. Market analysts point out that this trend responds to the need for financial institutions to somehow curb demand given their limited lending capacity. "With a lower rate, more people qualify, but banks don't have the necessary funding for this to happen, which is why they raise rates," explains José Rozados, founder of Reporte Inmobiliario.
The Argentine mortgage market is still in its infancy . The current average mortgage stock hovers around US$200 million , a low figure for a country of Argentina's size and housing needs. Many of the loans granted in recent months were based on the perception that the dollar wouldn't skyrocket. Today, that confidence is under review.
Despite the current situation, is Argentine real estate still a good opportunity for those who want to enter? The answer, experts say, is yes. "For those who already have dollars and can buy without relying on credit, it's still a good time," they say.
“ Prices in dollars remain low compared to historical figures . Furthermore, if credit survives this situation and normalizes, prices could begin to rise, and then the first entrant wins. But it's a game that only those who are already liquid or have financial backing can play today . Mass access is still very limited,” Daitch adds.
González Rouco agrees: "Real estate prices haven't risen as much as they will. It's a property that remains undervalued, and if you can afford to get involved, do so. You can't put a price on the security of your home."
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