By Jason Mitchell
At the end of August, the central bank issued new guidelines enabling banks to provide mortgages of up to 100% loan-to-value on amounts up to Ps200,000 ($64,363) and 90% LTV on sums up to Ps300,000.
Since the country’s 2001 economic crisis, mortgage borrowers have had to provide a deposit of more than 25% LTV, effectively placing home loans off limits for most middle-class Argentines. Last year, lenders wrote Ps2.5 billion of mortgages compared with Ps4 billion to Ps4.5 billion annually in the late 1990s.
The government wants to help tenants – who face rental increases of up to 20% a year – to buy their own homes. It is pressing for the banks to provide mortgages with interest rates of 7.5% (despite annual inflation of more than 11% and current mortgage rates of 15%).
Alberto Saravia, chief executive at Saravia Finance Management in Buenos Aires, says: “The reforms could triple the size of the mortgage market. However, the big problem is the complete lack of long-term capital. Most time deposits are of 30 to 60 days (with interest rates of 7%), but the government wants the banks to provide mortgages of 25 to 30 years.