Brazilian Banks to Provide Inflation-Adjusted Housing Loans

RIO DE JANEIRO, BRAZIL – Banks will be able to offer inflation-adjusted housing loans. The National Monetary Council (CMN) has approved a resolution allowing new financing from the Housing Finance System (SFH) to have the outstanding balance updated by price indices.

The resolution was approved in the CMN extraordinary meeting on Wednesday morning, August 14th, but was only released by the Central Bank (BC) on Thursday, August 15th, at the end of the night, after the president of Caixa Econômica Federal, Pedro Guimarães, has announced that the bank will now grant real estate credit corrected by the National Broad Consumer Price Index (IPCA) plus a fixed interest rate.

Housing loans are corrected by the Reference Rate (TR), currently at zero, plus fixed interest rates that vary according to the borrower’s profile. In July of last year, the CMN had approved the concession of credit corrected by inflation. The resolution, however, did not cover SFH operations, in which the borrower uses the balance of the Service Time Guarantee Fund (FGTS) account to pay installments and reimburse the outstanding balance.

In a note, the Central Bank explained that the measure would contribute to rendering the housing market less dependent on savings and FGTS, the funds of which are partly used for housing loans. According to the Central Bank, inflation-adjusted financing can serve as a basis and increase the share of real estate credit instruments traded on the financial market, such as real estate receivable certificates and guaranteed real estate notes.

According to the statement, the measure stems from the financial system’s modernization and will benefit the consumer by expanding the types of real estate financing available, increasing competition among financial agents and reducing the final interest rates for the borrower.