The Minister of Economy, Luis Caputo, announced a new program aimed at reactivating mortgage credit in Argentina through the use of funds from the Sustainability Guarantee Fund (FGS) of Anses. The initiative involves bidding for fixed-term deposits among banks to generate long-term funding and expand the capacity of financial entities to grant loans.
The program will have a total amount of $2 trillion, which will be awarded through successive bids of $200 billion. The first call will take place next week and will allow for the evaluation of the banks' response to the new scheme.
The measure specifically aims to finance the purchase, construction, expansion, and renovation of first homes, with mortgage loans at extended terms and maximum rates set by the Government.
How the new mortgage program will work
The scheme includes the placement of fixed-term deposits in pesos adjustable by UVA plus a spread, which will be awarded through transparent bidding among financial entities.
Two alternatives have been established for the deposits:
One-year term: UVA + a minimum spread of 2.50%.
Five-year term: UVA + a minimum spread of 4.50%.
Each bank may bid up to 20% of the total amount of each auction and will have 90 calendar days to apply the funds from the establishment of the deposit.
How the new mortgage program will work
The first auction will be for $200 billion, within a program that could reach $2 trillion in total.
Mortgage loans of up to 15 years
The Government has also established conditions for the loans that can be granted using this funding.
The maximum allowed rate will be UVA + 7.50%, while the loans must have a minimum term of 15 years.
The maximum amount of each loan will be equivalent to 150,000 UVA and will be aimed at individuals looking to acquire, build, expand, or renovate their first home.
The goal is to address one of the main problems currently facing the financial system: the difficulty for banks to obtain long-term funding that allows them to offer mortgage loans for several decades.
Caputo pointed to the low level of mortgage credit
During the presentation, Caputo highlighted the enormous difference between the level of mortgage credit in Argentina and that of other countries in the region and the world.
“The stock of mortgage loans in Argentina barely represents two percentage points of GDP. To give you an idea, in Chile it represents approximately 27%. In more developed countries like the United States, it reached 75%. So, there is really a very, very large margin for growth,” he stated.
For the minister, the lack of long-term credit is linked to decades of economic instability, financial crises, and abrupt changes in the rules of the game.
Caputo pointed to the low level of mortgage credit
Caputo recalled episodes such as the Bonex Plan, the corralito, expropriations, and defaults, and stated that these experiences deteriorated the trust of Argentines in institutions, currency, and the financial system.
“So, a long-term savings development or capital market was never generated in Argentina,” he explained.
The FGS as a source of long-term financing
The initiative will use the Sustainability Guarantee Fund (FGS) as a tool to extend the terms of the funding available to banks.
“What will be done is to extend the terms of these fixed-term deposits, conduct transparent bidding with banks to extend the terms of these fixed-term deposits between one year and five years. And this will allow banks to significantly accelerate the level of mortgage loans,” Caputo explained.
The logic of the program is that banks can have resources with longer maturities and, in this way, reduce the mismatch between the deposits they receive and the mortgage loans they grant.
The Government thus seeks to create a deeper mortgage credit market, facilitate access to housing, and at the same time give a greater boost to construction.
The Government seeks to reactivate construction
The initiative also targets one of the sectors that most need to regain dynamism: construction.
During her visit to Argentina, the head of the International Monetary Fund (IMF), Kristalina Georgieva, pointed out the importance of reactivating activity and generating conditions for the recovery of the sector.
From the real estate market, various proposals had also been made to the Government to use the FGS as a tool to expand mortgage financing.
With this new program, the administration of Javier Milei seeks to transform part of the available savings into long-term financing, increase the supply of loans, and facilitate access to first homes.
The first auction of $200 billion will be the first step to measure the response of the financial system and determine the pace at which the $2 trillion program aimed at putting mortgage credit back at the center of the Argentine market will advance.
