Argentina Central Bank to launch new mortgage plan
Source: Buenos Aires Herald
By: Fermín Koop
The Central Bank is moving forward with a plan to boost the number of mortgage loans at a lower interest rate, moving forward with President Mauricio Macri’s campaign promise to offer one million mortgages during his tenure.
The goal is to create a local version of the system that is currently in place in Chile and Uruguay, which are based on a unit of account tied to the consumer price index. The system would lead to much cheaper installments and fewer requirements to be able to obtain a loan, which is the main problem faced by those who want to buy property.
While experts say the plan is positive, they also warn it will take time and said it cannot succeed unless the inflation rate decreases. The number of mortgages in Argentina in relation to the GDP is 1.3 percent, the lowest of Latin America, according to a recent report by the Housing Finance Information Network.
“It’s a very good initiative but it only makes sense if the government can control the inflation rate. The only way to offer more mortgages is by having a lower inflation rate,” Tomás Marolda, secretary at the Argentine Real-Estate Chamber (CIA), told the Herald. “It’s key for the economy to have a dynamic real-estate market as it has positive effects on the economy as a whole.”
If Central Bank Governor Federico Sturzenegger’s plan is implemented, real-estate prices either for rent or purchase would no longer be priced in US dollars or in pesos but instead in a entirely different unit, which would represent the amount of currency units, or pesos, necessary for citizens to buy a representative basket of consumer goods.
In Chile, the unit is know as Unidad de Fomento, or UF. When a landlord advertises an apartment to rent, he sets the monthly rate at a certain amount of UF. A potential renter, curious about the price, then checks the current UF-to-peso exchange rate and multiplies it for the amount of UF set by the landlord. If he agrees with the price, he would then start paying a UF-denominated rent each month in pesos.
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