The Government presented a new program to boost mortgage credit in Argentina through funds from the Sustainability Guarantee Fund (FGS) of Anses. The scheme includes the placement of $2 trillion in fixed-term deposits in banks, aiming to generate longer-term funding and expand the supply of loans for the purchase, construction, expansion, or renovation of the first home.
The Minister of Economy, Luis Caputo, and the General Director of Investments of the FGS, Juan Cruz Micele, explained the details of the initiative during a press conference. The mechanism aims to address one of the main historical obstacles of the mortgage market: the mismatch between the terms of bank deposits and housing loans, which can extend for 15, 20, 25, or even 30 years.
What did the Government announce?
The FGS will auction fixed-term deposits in pesos adjusted by UVA plus a spread, which will be captured by financial entities through auctions.
The money will have a specific destination: it must be used to grant mortgage loans to individuals for first homes.
The program will have a total amount of $2 trillion, while each auction will be for $200 billion. According to the information provided, the first auction of FGS deposits will take place next year.
The initiative also establishes specific conditions for banks and for the loans granted with those funds.
What did the Government announce?
How will the auctions work?
The program will be divided into two tranches:
Tranche 1
Term: 1 year.
Minimum rate: UVA + 2.50%.
Tranche 2
Term: 5 years.
Minimum rate: UVA + 4.50%.
Banks will compete in the auctions to obtain the funds. Each entity may bid up to 20% of the total amount of each auction.
As each round will have an amount of $200 billion, no entity may concentrate more than 20% of those funds in a single auction.
Once the deposit is established, the bank will have 90 calendar days to apply the resources to the granting of mortgage loans under the established conditions.
What characteristics will the loans have?
The program establishes a set of conditions for the mortgage loans financed with these funds.
The maximum rate for the borrower will be UVA + 7.50%, while the term must be at least 15 years.
Additionally, each loan will have a limit of 150,000 UVA, which during the presentation was estimated at approximately USD 200,000.
The loans will be exclusively for first homes, including acquisition, construction, expansion, or renovation operations.
In this way, the Government seeks for the funding provided by the FGS to directly translate into a greater supply of credit for families looking to access a home.
Who could access it?
The program targets individuals seeking to finance their first home, although the concrete approval of each loan will still depend on the requirements established by each bank.
During the presentation, Caputo explained that the average amount of mortgage loans was around $114 million.
Based on that, the minister estimated that the $2 trillion from the program could generate housing solutions for between 17,000 and 18,000 families.
As an example, Caputo took a property valued at USD 106,000. If the bank financed 75% of the value, the loan would be approximately USD 80,000, equivalent to about $114 million.
For that case, with a rate of UVA + 7% and a term of 25 years, the estimated monthly payment would be $865,000.
If the payment represented 25% of the family's income, it would be necessary to have a net income of approximately $3.46 million.
Caputo also suggested that a young couple with two salaries could reach that income level and access financing.
Why is the FGS intervening?
The goal of the FGS is to provide long-term funding to the financial system.
As Caputo explained, banks have difficulties financing long-term mortgage loans because a large part of their deposits has much shorter maturities. While a mortgage can last for decades, banks usually have demand deposits or fixed-term deposits of relatively short periods.
The intervention of the FGS seeks to reduce that mismatch through deposits of one and five years, allowing entities to have a more stable source of financing to expand their mortgage portfolio.
Micele explained that the FGS worked for several months with the Ministry of Economy and Human Capital to design the mechanism.
According to the official, the current mortgage market generates around $300 billion monthly in loans, so the $2 trillion program represents a significant volume compared to the current size of the market.
Caputo highlighted the low level of mortgage credit in Argentina
The minister also focused on the historically low development of mortgage credit in Argentina.
“The stock of mortgage loans in Argentina barely represents two points of the product,” said Caputo, comparing that figure with Chile, where it is around 27%, and the United States, where it reached much higher percentages.
For the minister, the explanation is linked to decades of economic instability, inflation, financial crises, and lack of trust in the financial system.
In that context, the Government believes that extending the terms of bank funding can help develop a deeper mortgage market and generate new financing alternatives for families.
The FGS claims it has increased its assets
Micele also highlighted the asset evolution of the Sustainability Guarantee Fund.
As he explained, when Javier Milei took over the administration, the FGS had approximately USD 30 billion in assets, while it currently reaches USD 80 billion.
The official emphasized that the main mandate of the fund is to preserve the security and profitability of its investments, while among its secondary objectives is to contribute to the development of the macroeconomy.
In that framework, the Government seeks to use part of the FGS resources to extend long-term financing and expand access to mortgage credit.
The first auction will be the next step to test the mechanism. Based on the response from banks, the Executive will be able to evaluate the functioning of the program and move forward with the following rounds until completing the $2 trillion planned for mortgage funding.
