the impact of inflation on income

The mortgage credit it has been resilient to the impact of the pandemic and a difficult economic context; however, specialists anticipate that a lower availability of personal income, derived from high inflation, could reduce placement and thus lose the rhythm that has been observed in recent years.

According to BBVA Research data, in October of last year, the real annual growth of current balances of the mortgage credit it stood at 3.2%, equal to the average observed in the first nine months of the year, but with a recovery compared to what was observed in August and September (2.9%) of 2022.

However, according to the bank’s analyses, the dynamism of this portfolio has a downward bias, since it reacts with a lag to the behavior of formal employment which, together with the increases in long-term interest rates, would point to a more moderate demand for mortgage credits in the future.

“Consumer confidence in the housing sector has fallen significantly (-11.7% annually as of last September) and this could moderate the demand for home loan“, commented Carlos Serrano, Chief Economist of BBVA in Mexico.

For the CEO of Mortgage credit of HSBC, Enrique Margain, the market challenges will be interest rates, housing prices and, especially, the disposable income of Mexicans from employment.

“We come from two years with significant inflation, income does not grow at the same rate as people’s expenses. In addition, the salary increases once a year, while inflation is continuous. This is the most important component, the one that would worry me in terms of placement, because it impacts people’s ability to pay”, commented Margain.

According to analysts, one element that has affected the working market It has been the high level of inflation that, from January to November 2022, had an average of 7.9 percent.

This, for specialists, had a negative impact on real wages and the wage bill; although the salary negotiations at the beginning of the year, the increase in the minimum wage and the significant creation of employment have given them resilience.

According to BBVA, real wages have remained 3.2% above the pre-pandemic level and the wage bill at 8.7%. A behavior that, it is expected, could change in 2023.

“The strength of the labor market will be affected by the slowdown in the economy forecast for 2023 and a rebound towards 2024, for which we expect formal employment to have year-on-year growth at the end of the period of 2.5% and 3.2%, which which implies a creation of 520,000 and 700,000, respectively”, detailed the bank.

current market value

Currently, the mortgage portfolios They have a value of more than 3.2 trillion pesos in Mexico, with around 8 million mortgages. Margain explained that, in 2021, the bank placed 155,000 creditswith a total amount of 267,000 million pesos, a historic year in which it grew 34% compared to the previous year.

By 2022, the expert affirmed that a decrease in the number of operations was observed, with an approximate increase of 6.6%, that is, around 285,000 million pesos in financing for housing.

Even though he working market and the real salary of Mexicans represents a significant challenge for the market, the HSBC executive stated that there are also positive aspects facing 2023, such as the deficit of 9 million homes in Mexico, as well as solid banking and a resilient mortgage sector with fixed rate products.