Selic shot makes property purchased in the plant more expensive

The increase in the Selic rate by 1 percentage point, to 11.75%, announced this Wednesday (16th) has not yet reached real estate credit rates, but it may be a risk for those who bought a property in the plant in recent years and will receive the keys in 2022.

Simulation carried out by the property credit platform MelhorTaxa, comparing the real estate financing conditions of March 2020 with the current ones, points out that the total effective cost of credit has already increased from 8.25% per year to 10.06%. At the time, the average interest charged for the financing was 7.49%.

A person who is about 30 years old, who buys a property worth R$ 400 thousand and, with the withdrawal of 30% of the down payment, needs to finance R$ 280 thousand, would pay R$ 618,692.61 at the end of the contract.

This year, the same financing would cost, in the end, R$ 689,495.28, a difference of almost R$ 71 thousand.

In addition to the higher amount spent, the increase in the interest rate means that you need to prove a higher income. If in 2020 it was necessary to have an income of BRL 8,517.74 to obtain financing of BRL 280,000, today the amount has risen to BRL 9,825.27, and could increase even more if banks raise rates.

​The minimum required income drives away new buyers, who can postpone the purchase decision, and is a risk for those who bought property in the plant two, three or four years ago, and receive the keys in 2022.

In this type of purchase, the owner of the property only begins to pay the financing effectively when the property is delivered. If you cannot prove the income required to obtain the credit, you may be forced to cancel, and pay a fine ranging from 25% to 50% of the value of the property.

“It can finance with the construction company or take out even more expensive credit with smaller banks that are pricing this risk”, says Paulo Chebat, CEO of MelhorTaxa. If you can’t pay, you lose the property.

Financing simulation for a property worth R$ 400 thousand

Source: MelhorTaxa

According to a survey by the platform, the average rate charged this month by the five main Brazilian banks —Banco do Brasil, Bradesco, Santander, Itaú and Caixa—is 9.33% per year, a level it has maintained since January.

Chebat says that a new increase in real estate financing rates is expected, mainly because the Central Bank has already signaled a new increase of 1 percentage point for the next Copom meeting, but that it should not follow the same pace of increase in the Selic rate.

“When the rate rose from 6% to 7%, the banks followed it very quickly, but now that it is above 10%, the transfer of this increase tends to be smaller and longer”, he says.

He analyzes that large financial institutions cannot raise their rates at the speed of the Selic rate because that would make financing inaccessible to consumers. “Large banks, which have a very large savings portfolio, will hold back a little, because they have the obligation to put part of that money in real estate credit and they need customers,” he says.

This is the same opinion as Ely Wertheim, executive director of Secovi-SP, who foresees an increase of 1 to 1.5 percentage points for real estate credit. “Real estate financing has locks, it won’t rise at the Selic level, in the same way that it didn’t go down much when the basic rate was 2%”, he says. “It will continue to be the cheapest credit available”.

Even without major increases expected for the future, the rates charged today are much higher than they were two years ago, when the Selic reached its minimum value of 2% and the average interest on real estate financing was 6.96% per year.

In a note, the president of Abrainc (Brazilian Association of Real Estate Developers), Luiz França, stated that the entity understands that the increase in the Selic rate was a measure to contain the inflationary process, but that “it would be essential that this increase not be passed on to the rates of real estate credit, which is the main driver of the construction sector”.

The CEO of MelhorTaxa says that, for the time being, there is no perceptible increase in cancellations, but that this may occur in the future. The fear is that the wave of withdrawals registered in 2015 and 2016 will be repeated, which led to changes in the rules for canceling the purchase of the property, which have been stricter for the consumer since then.

Roy Martelanc, coordinator of the FIA ​​Business School, also recalls that fixed-rate financing contracts are linked to the TR, which is no longer set to zero, which also increases the amount to be spent. “People get used to the fact that the contact they signed has a fixed rate, but it doesn’t. With high interest rates, the TR is not zero, it will pay more,” he says.

Wertheim sees no reason to be concerned about cancellations. “It’s not a movement that is happening. Those who bought an apartment two years ago are very satisfied with the investment they made, with the appreciation, it won’t be a percentage point now, in a 20 or 30 year financing, which will change that” , it says.

Portability is a future option for those who hire expensive financing

If waiting for interest rates to drop is not an option, what consumers can do is try to renegotiate their financing rates with the bank or ask for portability to an institution that offers lower rates, when interest rates drop.

Martelanc analyzes that a reduction in the Selic and in inflation is expected from next year, which should lead to a reduction in real estate financing rates, but it is not possible to say that this will occur.

Meanwhile, the real estate sector is expected to have a tougher year than the last two. “High interest rates get in the way of selling anything, but especially real estate, which is dependent on credit,” he says.

According to the executive director of Secovi-SP, the sector is expected to have a 10% to 15% drop in sales, which the entity considers a stable scenario, after the positive results of recent years.