BancoEstado sees mortgage campaign, rate hikes sparking new sales, refinancings

Chilean state-owned bank BancoEstado expects its annual advertising campaign aimed at promoting mortgage lending and imminent hikes in the overnight lending rate to spur new sales across the board and refinancings over the next few weeks, the bank's deputy manager of mortgage business, Marcelo Hiriart, told BNamericas. Last month, BancoEstado launched a campaign called "Your own house: It's now or never," which offers mortgages starting at 2,000 UFs (43.5mn pesos, or US$94,000), the country's inflation-linked unit, for both new and used homes. BancoEstado is offering loans with up to 30-year maturities that finance up to 90% of the home's value. The campaign runs until May 31. Low interest rates currently being charged on mortgages are expected to encourage more refinancings for loans granted by the bank and by other lenders, Hiriart said, since rates for long-terms loans are expected to rise during the rest of 2011 given the central bank's ongoing rate hikes. In April and March, the monetary entity hiked the TPM overnight benchmark interest rate by 50 basis points each month to 4.5% to fight inflationary pressures. According to a central bank poll of analysts released Tuesday, a weaker-than-expected inflation figure for April should provide the monetary entity with room to lower the pace of rate hikes to 25 basis points at its Thursday (May 12) meeting. Still, analysts are expecting the benchmark interest rate to end 2011 at 6% as upside inflation risks prevail. BancoEstado is the leading player in the mortgage segment with an approximate 24% market share, or 4.64tn pesos, as of end-2010. The segment represents about one-fourth of the financial system's total loans and grew 10.6% in the year ended March, to 19.7tn pesos. According to Hiriart, the mortgage segment should end 2011 with an annual increase of 12-14%.