Low income moves centre stage
Until 2006, only a few banks had seriously looked at the mortgage market; instead it was the private developers that were the main players beyond state-owned Caixa Econômica Federal (CEF). Developers are involved in more than buying and developing land. They have also had a hand in mortgage lending.
These days developers have turned their efforts to the housing shortage affecting Brazil’s large population of low-income families. "Demand for mortgages from low-income borrowers constitutes one of the major opportunities," says Renato Steiner, head of personal financial services at HSBC.
Among low-income families, average expendable incomes are rising. Three years ago a minimum salary of R$7,000 a month was needed to service a R$150,000 loan, now R$4,000 a month is enough to pay instalments on a 20-year R$150,000 loan. It is this increase in tenor, as well as an increase in average expendable incomes, that combined explain why the market has grown so fast in the past year.
Developers saw this opportunity developing a couple of years ago when Brazil started down the path of economic stability. Companies that once devoted their entire business to building high-end residential properties for the wealthy in São Paulo and Rio de Janeiro started to reassess their portfolios.