Brazil Interest Rates Fall; Banks Lending More

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Mortgage rates in Brazil are at two-year low, while mortgage lending has increased as banks look to profit from a secure mortgage business. 

Itau Unibanco Holding SA and Banco Bradesco SA have each increased their home-loan portfolio by 32 percent to 32.4 billion reals ($13.6 billion) during the second quarter, compared to last year, according to Bloomberg. Meanwhile the average mortgage rate fell to 11.94 percent in June from 12.91 percent six months earlier, Brazil's central bank reports. 

Brazil's Central Bank has increased borrowing costs in an effort to control inflation. The benchmark Selic climbed 125 basis points from April to 8.5 percent in July. In turn, lenders have increased their mortgage business, making terms more attractive as other loan types become riskier. 

"Even if the central bank keeps raising Selic, the competition will maintain the mortgage rates flat or just a little higher," Octavio de Lazari, president of the nation's real-estate lenders association, Abecip, told Bloomberg.

Banks add security to loans by charging mortgage clients a life-insurance premium, Luiz Franca, mortgage director at Itau Unibanco, told Bloomberg. 

"Home loans now have real guarantees and the lowest delinquency rates among all types of credit," Mr. Franca said.

Outstanding home loans in Brazil reached 298.4 billion reals in June, increasing 35 percent from 220.3 billion reals the year before.

"Brazilian banks have finally woken up to the opportunities the mortgage market brings as a type of long-term lending that creates fidelity from clients, allowing them to offer other profitable products," Mr. Lazari said.