BBVA unit launches 15-year mortgage loans, slashes interest rates

Thursday, June 18, 2009

Colombia's largest foreign-owned bank, the local unit of Spain's BBVA (NYSE: BBV), has launched 15-year mortgages and slashed rates on new mortgages following a government push to jumpstart the local mortgage and construction markets, BBVA Colombia chairman Óscar Cabrera told a press conference.

BBVA Colombia's 15-year mortgage push now matches the offer of rival Davivienda, which unilaterally began offering loans with those maturities one month ago.

The BBVA unit lowered interest rates for 15-year mortgages by four percentage points to a 14.5% real annual rate, and for any other mortgages for the purchase of new or used houses to 13.5%.

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In April, President Álvaro Uribe announced a US$220mn subsidy for low-cost housing mortgages with 7-year maturities to be issued before June 2010, which would originate some 32,000 new mortgages according to preliminary estimations.

The government would help reduce interest paid on new mortgages by 500 basis points for loans of up to 135 times the minimum wage (some 67mn pesos or US$32,000) and by 300 basis points for loans in the range of 235-335 times the minimum wage.

Taking into account these subsidies, for mortgages up to 167mn pesos, BBVA customers will be offered annual real rates starting at 8.37%, Cabrera said.

According to figures from local regulator Superfinanciera, mortgage lending in Colombia - including loans from state-run lending agency FNA - grew 6.3% in the 12 months through April to 11.5tn pesos. The figure amounts to about 3% of GDP.

Its purchase in 2006 of state-owned mortgage lender Granahorrar has allowed BBVA Colombia to boost its market share in the mortgage lending business from 6.3% in December 2005 to 19.6% as of end-May.

Cabrera said the bank's plan also aims at helping to kickstart the construction sector and preserve jobs in the sector, which represents around 2.5% of the country's GDP and employs 16% of the urban workforce.

According to the national statistics agency, Colombia's economy shrank in the fourth quarter of last year by 0.7% year-on-year, marking its first quarterly contraction since 1999. Industry and construction contracted most, falling 8%.

In a presentation in Bogotá on Tuesday (Jun 16), finance minister Óscar Iván Zuluaga said he estimates the economy will grow 2.5% in 2010 as the global financial crisis eases, which would be a significant improvement on the 0.5% growth forecast for this year.

BBVA Colombia is the country's fourth largest bank, with 21.0tn pesos and 1.69tn pesos in assets and equity, respectively, as end-March.