Mortgage loan rates will move marginally, at the expense of bank profitability, but banks could seek more income in commissions

Despite the fact that, in 2022, the banks could contain, as long as they could, the increase in mortgage loan ratesafter an upward policy by Banco de México (Banxico) to mitigate the inflation, in 2023 it is expected that they will remain in this line, at the cost of their profitability; however, they would seek income from other sources, such as commissions.

According to data from Banco de México, the average rate of the mortgage loan offered by banks remained within a margin of between 10 and 11%a scenario that would not change at least during the first quarter of the year and in a context where Banxico continues with the upward movements of the reference rate, which is currently 10.50 percent.

This behaviour would hit the profitability of banks regarding this product, since at least there is no intention that they seek to raise the rate abruptly in the coming months, but to alleviate this situation, they would seek to obtain income from other concepts associated with this financingsuch as commissions, indicated Víctor Noguera, co-founder of the proptech Flat.mx.

“The banks do not want to raise the interest ratebut they are supplementing it with commissions“, explained Noguera and added, that for six months there has been an increase in the Total Annual Cost (CAT) of this financing, which not only includes rates but other concepts associated with credits.

According to data from Banxico, the average CAT of the mortgage credit it went from 12.33 to 13.48% from November 2021 to the same month this year.

“This means that the commissions have risen more than what the mortgage rate“, commented Noguera and added that this trend will continue in the coming months.

Why doesn’t the rate go up as much?

One of the common questions is why the banks do not raise the mortgage rate at the same rate as the reference ratedefined by Banxico, which since June 2021 has increased 650 basis points.

For Carlos Serrano, chief economist at BBVA in Mexico, the mortgage credits they are more linked to the 10-year bond rate (M10) and this has not moved in a proportion as the reference rate defined by Banxico has.

“The benchmark for mortgage market are the 10-year bond rates, the M10 bond, and even though there has been a notable increase in M10 yields, where yields would have been assumed to rise more mortgage rateswhat we have seen is that these have increased to a lesser extent,” Serrano said.

The co-founder of Flat.mx, specialized in the sale of used housingcommented that banks choose to maintain the rate of their mortgage loans as much as possible, because it is a product that is profitable for them and, in addition, they can offer other types of credits to the person who has financing to purchase their home.

“Mortgages are a very profitable product for the bank, because whoever has the mortgage It has the payroll, it has the credit card and it has 40,000 products for the borrower, so the banks are fine to have a product like this, even if they lose something to have all the additional business,” Noguera said.

What is the future scenario?

For Samuel Vázquez, chief economist at BBVA Research Mexico, although, in the coming months, there could be a increase in interest rate The average of mortgage loans is expected to be marginal, since in a current scenario, where the rate is between 10.20 and 10.40%, said indicator could rise to 10.50% at the end of the first quarter of the year.

“There is no science, the (mortgage credit) rates are going to go up”Vazquez stated.

Noguera agreed that the mortgage loan rate will not increase significantly in the coming months, because there is no change in the behavior of the 10-year bond and, furthermore, a moderation in Banxico’s decisions with respect to the reference rate.

“When there are indicators that the inflation is controlled, when the reference rate falls, what will happen is that the rate will be lower, then the average increase in the next 10 years will not be so drastic,” said Noguera.