Mexico Mortgage Market Offers Competitive Environment for Borrowers

A “perfect storm” of sorts has been brewing for the real estate and mortgage sectors in Mexico, as the nation’s largest lenders and financial institutions make moves that will shore up these vital industries.

According to Deputy Finance Minister Fernando Aportela in a recent Wall Street Journal interview, construction employment in Mexico has expanded at least twice as fast as job growth in the broader economy over the last few months, which is a very good indicator that the housing sector is on the mend.

“Mexico’s largest state mortgage lender Infonavit will raise the maximum amount it can lend to would-be home buyers by 76 percent,” writes Reuters. “The agency expects to grant 560,000 loans for new and used homes, as well as remodeling, this year.”

Also of note, in August of 2014 Infonavit began granting even more loans denominated in pesos at a fixed rate for up to 30 years. Previously, the lender reserved loans in pesos for borrowers who earned more than 5.5 times the minimum wage, while loans for lower-income workers were denominated in multiples of the minimum wage.

“The Mexican government is tweaking its mortgage offerings,” writes the Wall Street Journal. “The higher credit ceiling could benefit 2 million workers.”

This August, Fitch noted that some banks in Mexico are launching new mortgage products in the single-digit interest rate range, including four of the nation’s largest financial institutions. The declining interest rates, combined with the slowdown last year of new construction in some areas and the importance of house acquisition lending in Mexico’s banking sector have all helped foster the current competitive environment.

“Mortgage loans are an important component of commercial banks’ balance sheet,” writes MarketWatch. “Considering Infonavit and Fovissste are expanding their credit products that are complementary to banks’ mortgage products, Fitch believes a persistent competition for tenured buyers will continue in 2014-2015.”

In late August Bloomberg reported that FHipo (Concentradora Hipotecaria S.A.P.I.) is preparing an initial public offering for Mexico’s first REIT (real estate investment trust) focused on residential mortgages. FHipo is backed by founders of Vace Partners, a boutique investment bank, and is also teaming up with the government-backed National Workers’ Housing Fund Institute (Infonavit), which originates around 70 percent of the nation’s home loans. Shareholders will receive earnings from interest on home loans, and the IPO is targeted to raise nearly $611,525,000.00.

“In 2015 we’re expecting there could be a significant recovery in the sector,” writes Bloomberg. “The REIT will use IPO proceeds to acquire 55 percent of the rights to mortgages from Infonavit, according to a prospectus on the stock exchange website.”