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How long until Argentina has mortgage credit again?

How long until Argentina has mortgage credit again?

Long term loans to buy homes lived a period of splendor in the ’90s, during convertibilitywhen many people were able to acquire their first property.

But The outbreak of 2001 blew up creditand in the last two decades the housing deficit did not stop growing, to such a point that credit to the private sector fell to its lowest historical levels, barely 4% of GDP.

Although the banks acknowledge having a lot of liquidity, At the same time, they indicate that the demand for loans remains at very low levels.: The low level of activity leads companies to not need credit and they still have a lot of stock.

In the case of families, the decision in general is not to take on debt, due to uncertainty about what could happen in a recessionary context and where there are doubts about the future of salaries.

Loans to the private sector increased only 144% year-on-yearhalf of the inflation accumulated in that period.

This is possibly one of the financial variables that performed the worst.

The banks say they want to increase their stock of credit to both companies and families, but that market conditions mean that for now demand remains at historically low levels.

The Central Bank was optimistic about a credit rebound “based on the improvement we are seeing in macroeconomic variables.”

As the Treasury now has a fiscal surplus, the banking sector’s demand for financing dropped significantly, so banks were left with a surplus of unplaced pesos. These funds end up going to passive repos from the Central Bank, as a way to achieve short-term returns.

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At the Central Bank they were optimistic about a credit rebound.

A credit boom?

Bank executives believe that if macroeconomic conditions improve there will be “a credit boom”especially because the market has been depressed for several years.

BCRA officials were optimistic about a credit rebound “based on the improvement we are seeing in macroeconomic variables.”

They consider that the ground is being prepared for the reappearance of mortgage loans, today practically non-existent in Argentine banks.

Of course, with an accumulated inflation of almost 300% in the last twelve months, it is directly impossible to offer long-term loans as is the case with housing financing. Today, the stock of mortgage loans represents just 0.1% of GDP.

Another element that may contribute to the increase in home loans is the drop in inflation.

This Friday the March index will be known, which would have been below 13.2% in February but still above 10%.

Moving forward, the market expects the downward trend to continue, although the process will be relatively slow.

This decrease in inflation should also accelerate the decline in interest rates, which should promote greater credit demand. But even with a more attractive financing cost, for the private sector it is even more important that economic activity begins to rebound.

Argentina is one of the countries in the region with the worst credit indices compared to the high levels observed in more mature markets such as Chile, Brazil, Peru and Colombia, with levels of loans in relation to Product that range between 60% and 100%.

That represents at least ten times more than in the local market.

These are countries with decades of stability and low inflation.

Source: Ambito

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