Banco Ciudad Joins the Movement for UVA Mortgage Credits amid Inflation Concerns: An Analysis of Interest Rates and Delinquencies

City Bank has joined the movement to relaunch new lines of UVA credits for home purchase or construction. Banco Hipotecario, which initially launched this initiative, is leading the way, with public and semi-public banks taking the lead. Private banks are expected to join later in the year.

Banco Ciudad’s initial proposal includes offering a maximum amount of 250 million pesos over 20 years, with an annual nominal rate of 5.5%. However, for properties located in Buenos Aires microcenter, borrowers can get a reduced rate of 3.5%. The bank aims to encourage investment and transformation of areas affected by the pandemic while adjusting capital owed based on the value of the Purchasing Value Unit (UVA) to counter inflation.

On the other hand, Banco Hipotecario has launched a credit line for a maximum amount of 250 million pesos over 30 years at an interest rate of 8.5%. However, borrowers with their salary account at the bank will get a reduced rate for the first 12 months. Both banks agree to prioritize borrowers with salary accounts at their respective banks and will finance up to 80% of transaction value.

The National Bank plans to offer CER mortgages and intends to introduce a safeguard that protects debtors if inflation surpasses income during loan term. If fee-income ratio exceeds pre-set limit during loan term, safety measure will kick in. Despite challenges, UVA mortgage delinquencies are less than 1% of loans granted between 2016 and mid-2018, suggesting relative stability in market.