This year, the placement of mortgage credit will be impacted by the loss of jobs and the drop in income, even despite possible improvements in interest rates, BBVA anticipated. Carlos Serrano, chief economist of the institution, commented that in the first quarter of the year there was a slowdown in commercial banking, mainly due to the employment factor and the first effects of Covid-19.
“Banks began to show effects of the slowdown. Part of this is that a certain effect began to be seen that the rate of job creation was lower in 2019 and began to translate in 2020; part also due to loss of confidence and that we started to see the effects of the pandemic in March, “said the manager.
“This is going to be the theme for the year, credit is going to contract both from institutes and from banks, especially because there is going to be a very significant drop in demand, which will be explained by the destruction of jobs.”
According to the institution’s “Mexico Real Estate Watch” report, in January-March of this year the number of loans placed by banks decreased 7 percent, while the amount placed fell 6.5 percent compared to last year.
In the opposite case, the public institutes (Infonavit and Fovissste) increased 6.3 percent annually the number of loans placed, and 4.7 percent the dispersion of resources, especially for completing pipeline loans since last year.
However, since job creation is the main driver for mortgages, this factor will reduce demand.
“Although there may be equal or marginally better conditions in rates, this is going to be more than overshadowed by the drop in employment,” he explained.
Serrano recalled that in the case of mortgage rates, the benchmark of Banxico is not the main one, but the 10-year bond, however, improvements in the offer are still foreseen, especially to boost the payment of liabilities, that is to say , changes of institution for a credit already requested.
Regarding jobs, for this year BBVA estimates that up to 1.5 million jobs will be lost.
“Employment was already weakening, the Covid crisis precipitates this fall, but employment has been weakening since mid-2018,” said Serrano.