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Brazil Mortgage Market Booms

An expanding mortgage market is a sure sign of an expanding - and maturing - property market. Latest figures released by the government-owned Caixa Economica Federal in Brazil show that both the property and mortgage markets in Brazil are growing fast, an indication that the time is ripe for property investment in Brazil.

According to Caixa statistics, mortgage lending by the bank in the first six months of this year reached R$17.4 billion, a spectacular increase of 90% on lending during the first half of 2008. When the R$17.4 billion is compared with the amount loaned during 2005, the growth is even more impressive. In 2005, the Caixa lent homebuyers just R$5.1 billion. Four years later, mortgage lending has increased by 340%.

Not only have the first six months of this year seen booming business for mortgages in Brazil. In a press release issued on 17th August, the Caixa reports that by the middle of August this year, mortgage lending for buying property in Brazil had reached R$23.2 billion, an increase of 88% on the same period of 2008. By the end of the year, the Caixa expects to have approved a massive R$39 billion in home loans, a figure far higher than predicted by experts at the beginning of the year.

A fundamental factor behind the enormous rise in mortgage lending for Brazilian real estate is the recent fall in interest rates (known as the Selic). Brazil has traditionally featured among countries with the highest interest rates in the world. However, rates have been gradually falling over the last two years. From a rate of nearly 20% in 2005, the Selic now stands at 8.75%, the target set by the Brazilian Central Bank for this year. The general consensus is that the Selic will continue to go down during the rest of this year and 2010.

Another element contributing to Brazil's booming mortgage market are the government-backed stimulus plans, designed to boost economic growth during the global financial crisis. Among the many measures - most of which are large scale and involve major government spending - is the ambitious ‘My House, My Life' scheme, which aims to provide affordable housing for thousands of Brazilians.
‘My House, My Life' has a financial allocation of R$60 billion behind it and is acting as a major incentive for both homebuilders and homebuyers. The Caixa bank reports that in the first four months of the scheme, it has received petitions for the financing of 255,000 homes.

Mortgage lending for foreigners making investment in Brazil property is still very much in its infancy. However, most analysts believe that the phenomenal success of the mortgage market for Brazilian nationals and residents means it's only a matter of time, possibly months, before commercial banks expand their services to include a full range of mortgage options for foreign buyers of homes in Brazil.

At Obelisk, we believe that demand will undoubtedly be huge since investment interest in Brazil is at an all-time high and Brazil also offers the winning combination of unbeatable property prices and steadily falling interest rates.

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