Mortgage loans have risen sharply in the last month. This has put an end to the financial and reparation boom that had been developing before the social crisis began; the rates reached a historical low.
Analysts, real estate brokers and clients, who have seen how conditions changed drastically throughout the social crisis, have indicated this.
“In recent weeks, we have seen a significant increase in interest rates for mortgage loans,” says Angélica Córdova, key accountant manager at ComparaOnline.com.
“For example, for a 5,000 UF property which had a fixed rate of 20%, over the past month, has increased by 22% on average.”
CompraOnline.com monitors the credit rates that banks offer in their online simulators daily; they are dedicated to comparing financial and insurance related products. According to their records, the banks with the largest increase are Falabella and Banco de Chile. The BCI (Banco de Crédito e Inversiones) is the one with the smallest increase at 0.14 ‘points’; ScotiaBank is the only one that has decreased.
The rates that customers are able to access may differ from those indicated in these calculations. However, the change in conditions has been evident to other observers in the banking industry.
“The banks have told us that they have raised their housing rates by more than one percentage point,” says a fund manager who invests in shares of the banking sector.
“Clearly, the flow of contributors who want to buy properties have gone down,” says Reinaldo Gleisner, a consultant to the brokerage area of Colliers.
“This is due to two reasons: a rise in the rate for these loans as the banks in Chile are very conservative and an increase in restrictions.”
The fear of increased risk for the country has raised funding costs.
“The banks are no longer able to finance for the same value, they demand a higher return,” says Milenko Mitrovic, portfolio manager at the Swiss-based firm Octogone.
“If banks see that risks are higher, rates rise.”
Debt market managers say that with the demonstrations and vandalism, the favourable conditions with which the banks got their long-term financing were left behind.
“When rates reached their lowest, treasury bonds in UF (BTU) that expire in 2044 was the UF + 0.3%. However, today, rates are at UF + 1.2%: up 95 basis points,” says Guillermo Kautz fixed income manager at MBI AGF (General Administrators of Funds) .
To this, the spread of the banks must be added. This is the difference between the risk free base bond and the bank bond.
“From its lowest point to now the bank spread has risen by about 50 basis points, reaching 100 points,” he says. The sum of both is an increase of 145 basis points.
“That is what raised the cost of bank funding in instalments matching the mortgage loans,” explains Kautz.
Real Estate Effect
Customers have also felt the increase in rates and requirements for their mortgage loans.
“I was drawing up two mortgage loans with the Bank of Chile; for some reason my executive postponed the firm for a couple of weeks. She said that he could offer me lower rates,” says Dr. Douglas Greig.
“He called me last week and told me he couldn’t follow through with the rates. The management team had pointed out that everything was frozen.”
The cardiologist points out that this has become a topic of common conversation between colleagues and friends. Many face the same issue with different banks.
From Colliers, they say that the change of conditions mainly affects those who buy their own property.
“The possibility of an economic downturn that ends in redundancies will cause many people to postpone their purchase decision and continue leasing. This, on the other hand, benefits the prospects for those who invest in properties to lease,” they say.
Translated from ‘Bancos aumentan tasas y exigencias para créditos hipotecarios‘