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Mortgage loans: the Central Bank could improve the conditions for buying a property - La Nacion Propiedades
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www.lanacion.com.ar
February 06, 2025
The bank cut its annual nominal monetary policy rate from 32% to 29%. Could this affect the mortgage loan lines offered by 24 banks?
By Candela Contreras
Mortgage loans: The reduction of Central Bank rates can have a positive impact on the lines of credit offered by banks to buy a house Shutterstock
The Central Bank of the Argentine Republic (BCRA) decided to reduce the monetary policy rate from 32% to 29% of the TNA (Annual Nominal Rate), while the interest rate on active repo rates dropped from 36% to 33%. This measure, “is based on the consideration of the consolidation observed in the expectations of a decrease in inflation ,” can be read in the BCRA statement.
The monetary policy rate is the reference adopted by the BCRA to achieve its inflation targets. A reduction in this rate means that banks can access cheaper financing from the Central Bank , which usually translates into lower rates for loans and credits in the financial system.
But could this decision have any impact on the UVA mortgage loan market - which returned to the market in April 2024 thanks to 24 banks?
To answer this question, we must first understand why the Central Bank has cut the rate: “ This reduction is a sign of stability . The rate reduction is a reflection of greater nominal stability: lower inflation, lower country risk and lower nominal rate ,” explains Federico González Rouco, an economist specializing in housing.
So, what does this measure imply for those seeking access to a UVA mortgage loan? First, one cannot help but think that in December 12 banks decided to increase the rates on their mortgage credit lines , leading to an average rate of 7.4%, when before it was 5.5%. “This means an increase in the initial fee (and the required income) of 20% on a 25-year loan,” explains González Rouco. This measure affects a large part of potential borrowers, since: higher rates mean more expensive loans; which means that fewer people can access them .
For the economist, the key to understanding the effect on mortgages is knowing how to differentiate between nominal and real rates . “ The BCRA rate is nominal . Whereas, in a UVA loan , you only look at the real part because the nominal part is already in the installments adjusted for inflation. That all the nominality goes down in the medium term is good for a lot of factors, but for mortgage credit, for the real rate to change, it will also depend on the funding capacity of the banks ,” he details.
Banks , he points out, do not make decisions based solely on the BCRA rate : “What really matters is the cost of funding and how country risk evolves, the possibility of accessing capital markets and macroeconomic stability .”
Therefore, “if all the reductions and nominality levels are sustained over time: greater stability in price levels ( lower inflation ), greater stability in the exchange rate ( dollar ) and lower interest rates , we will see an impact on mortgage rates ,” says Rouco. “In addition, banks would not have to raise rates, but for the same reasons for which the BCRA lowered them (macroeconomic stability),” he adds.
Economist Juan Manuel Telechea agrees: “This BCRA rate is a reference for banks and also serves to place excess liquidity, so it impacts in some way on the rate that entities offer, although not proportionally.” The big problem, as González Rouco explained, is that “the increase in rates on loans that we saw in recent months is due to the fact that banks have little liquidity , due to the Government’s own economic measures, and they cannot lower rates now, and if they do, the impact will be very small.”
Specialists agree that this rate cut is a sign of macroeconomic stabilityFreePik
Furthermore, with lower rates, mortgage loan payments, unlike when they rise, become more affordable.” “In turn, this decrease would impact demand because more people could afford to pay a mortgage payment. It remains to be seen whether banks can resolve the need for liquidity to supply this large market of people who dream of owning their own home ,” he says, adding that when demand settles, banks will once again fight over rates.
LA NACION asked banks if the BCRA rate cut will impact mortgage loans. They confirmed that for this to happen, country risk rates would have to be lowered, expectations of the CEPO exit would have to be lowered, and a secondary mortgage market would have to be created (such as the titling of portfolios or securitization, means that make long-term financing possible and that are realized in retirement funds, pension insurance, among others). “You have to offer potential investors a rate similar to what a sovereign loan offers (a debt security issued by a government to obtain financing), otherwise it is more attractive for the bank to lend money to the State,” they say.
The issue is also the mismatch of terms . “The effect is not immediate as can happen with credit card interest, but with 30-year terms there are other variables that need to be modified to change the interest rates,” they explain.
For his part, José Rozados, founder of Reporte Inmobiliario, warns that the impact will not be instantaneous . “Banks set the rate according to the regulation of the expected amounts. If they see that the money is leaving faster than expected, they can limit access by raising rates, as happened at the end of last year,” he explains.
The BCRA's rate cut is a step in the right direction , but it does not mean that mortgage rates will automatically fall. González Rouco warns that the medium term is key : "If price stability, exchange rate stability and rate cuts are maintained, then we will see a sustained reduction in mortgage rates."
Ultimately, the BCRA's decision reflects a context of lower inflation and greater macroeconomic stability. If this trend continues, banks will be able to offer mortgage loans at lower rates, but the impact will be gradual and will depend on whether the economic scenario continues to improve.
www.buysellba.com
Source:
Créditos hipotecarios: el Banco Central podría mejorar las condiciones de comprar una propiedad
La entidad recortó la tasa de política monetaria del 32% al 29% nominal anual, ¿esto puede influir en las líneas de préstamos hipotecarios que ofrecen 24 bancos?
www.lanacion.com.ar
February 06, 2025
The bank cut its annual nominal monetary policy rate from 32% to 29%. Could this affect the mortgage loan lines offered by 24 banks?
By Candela Contreras
Mortgage loans: The reduction of Central Bank rates can have a positive impact on the lines of credit offered by banks to buy a house Shutterstock
The Central Bank of the Argentine Republic (BCRA) decided to reduce the monetary policy rate from 32% to 29% of the TNA (Annual Nominal Rate), while the interest rate on active repo rates dropped from 36% to 33%. This measure, “is based on the consideration of the consolidation observed in the expectations of a decrease in inflation ,” can be read in the BCRA statement.
The monetary policy rate is the reference adopted by the BCRA to achieve its inflation targets. A reduction in this rate means that banks can access cheaper financing from the Central Bank , which usually translates into lower rates for loans and credits in the financial system.
But could this decision have any impact on the UVA mortgage loan market - which returned to the market in April 2024 thanks to 24 banks?
To answer this question, we must first understand why the Central Bank has cut the rate: “ This reduction is a sign of stability . The rate reduction is a reflection of greater nominal stability: lower inflation, lower country risk and lower nominal rate ,” explains Federico González Rouco, an economist specializing in housing.
So, what does this measure imply for those seeking access to a UVA mortgage loan? First, one cannot help but think that in December 12 banks decided to increase the rates on their mortgage credit lines , leading to an average rate of 7.4%, when before it was 5.5%. “This means an increase in the initial fee (and the required income) of 20% on a 25-year loan,” explains González Rouco. This measure affects a large part of potential borrowers, since: higher rates mean more expensive loans; which means that fewer people can access them .
For the economist, the key to understanding the effect on mortgages is knowing how to differentiate between nominal and real rates . “ The BCRA rate is nominal . Whereas, in a UVA loan , you only look at the real part because the nominal part is already in the installments adjusted for inflation. That all the nominality goes down in the medium term is good for a lot of factors, but for mortgage credit, for the real rate to change, it will also depend on the funding capacity of the banks ,” he details.
Banks , he points out, do not make decisions based solely on the BCRA rate : “What really matters is the cost of funding and how country risk evolves, the possibility of accessing capital markets and macroeconomic stability .”
Therefore, “if all the reductions and nominality levels are sustained over time: greater stability in price levels ( lower inflation ), greater stability in the exchange rate ( dollar ) and lower interest rates , we will see an impact on mortgage rates ,” says Rouco. “In addition, banks would not have to raise rates, but for the same reasons for which the BCRA lowered them (macroeconomic stability),” he adds.
Economist Juan Manuel Telechea agrees: “This BCRA rate is a reference for banks and also serves to place excess liquidity, so it impacts in some way on the rate that entities offer, although not proportionally.” The big problem, as González Rouco explained, is that “the increase in rates on loans that we saw in recent months is due to the fact that banks have little liquidity , due to the Government’s own economic measures, and they cannot lower rates now, and if they do, the impact will be very small.”
Specialists agree that this rate cut is a sign of macroeconomic stabilityFreePik
Do lower rates guarantee more mortgage loans?
Alan Daitch, CEO of TasaTasa, believes that the bank's measure is positive because it changes the opportunity cost for banks . “By changing the opportunity cost of lending money to the State, banks can offer more attractive rates to mortgage loan users. If the BCRA rate falls, private credit should start to pick up ,” he says.Furthermore, with lower rates, mortgage loan payments, unlike when they rise, become more affordable.” “In turn, this decrease would impact demand because more people could afford to pay a mortgage payment. It remains to be seen whether banks can resolve the need for liquidity to supply this large market of people who dream of owning their own home ,” he says, adding that when demand settles, banks will once again fight over rates.
LA NACION asked banks if the BCRA rate cut will impact mortgage loans. They confirmed that for this to happen, country risk rates would have to be lowered, expectations of the CEPO exit would have to be lowered, and a secondary mortgage market would have to be created (such as the titling of portfolios or securitization, means that make long-term financing possible and that are realized in retirement funds, pension insurance, among others). “You have to offer potential investors a rate similar to what a sovereign loan offers (a debt security issued by a government to obtain financing), otherwise it is more attractive for the bank to lend money to the State,” they say.
The issue is also the mismatch of terms . “The effect is not immediate as can happen with credit card interest, but with 30-year terms there are other variables that need to be modified to change the interest rates,” they explain.
For his part, José Rozados, founder of Reporte Inmobiliario, warns that the impact will not be instantaneous . “Banks set the rate according to the regulation of the expected amounts. If they see that the money is leaving faster than expected, they can limit access by raising rates, as happened at the end of last year,” he explains.
The BCRA's rate cut is a step in the right direction , but it does not mean that mortgage rates will automatically fall. González Rouco warns that the medium term is key : "If price stability, exchange rate stability and rate cuts are maintained, then we will see a sustained reduction in mortgage rates."
Ultimately, the BCRA's decision reflects a context of lower inflation and greater macroeconomic stability. If this trend continues, banks will be able to offer mortgage loans at lower rates, but the impact will be gradual and will depend on whether the economic scenario continues to improve.
www.buysellba.com
