Davivienda launches 15-year mortgages

Friday, May 22, 2009

Colombia's third largest bank Davivienda has launched 15-year mortgages as part of the government's recent push to jumpstart the local mortgage and construction markets, the bank said in a statement.

Last month, President Álvaro Uribe's administration announced a US$220mn subsidy for low cost housing mortgages with 7-year maturities to be issued before June 2010. Davivienda has now unilaterally begun offering those mortgages for 15 years.

"Davivienda - who traditionally have the cheapest mortgages in Colombia- are again shaking things up. Other banks will now have to think hard as they once again play catch up," local brokerage Interbolsa said in a report.

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Davivienda has just over 2tn pesos (US$905mn) worth of mortgage loans, with about 70% of that figure for social housing. Last month, Davivienda chairman CEO Efraín Forero told BNamericas that the government's plan will help the bank grow considerably in the low income segment.

Mortgage loans in Colombia have been growing steadily over the last few years and banks have been funding a good chunk of them through securitizations.

Today, about 40% of mortgage loans disbursed by Colombian banks are being securitized by local mortgage securitization company Titularizadora Colombiana, the market's only player.

On May 8, President Uribe said the Colombian economy will probably post little or no growth this year. Lower exports and weaker activity in the retail, manufacturing and construction sectors have brought growth in the country practically to a halt. That forced the central bank to cut its previously expected 3% growth estimate for 2009 to the same estimate Uribe gave that day.