What are the new credits?
The law presented by the Government at the beginning of 2021 implies the change of the UVA index – adjustment for inflation – to one on wages. The credits will be granted in units of the Reference Stabilization Coefficient (CER-inflation) and the Construction Cost Index for the creditor and based on the Salary Variation Coefficient (CVS) for the debtor. Credits for up to 80% of the amount of the home will be given to those who want to acquire or build.
In order for the credits to be granted, the banks create a Coverage and Promotion Trust Fund (FFCP) that will have the objective of compensating the differences that occur in each period of payment of the installments. This fund will arise from the creation of a Mortgage Company that will administer said fund in order to create new mortgage loans with coverage of the installment in the event of mismatches between salaries and inflation to give the system sustainability.
The Coverage and Promotion Trust Fund will be made up of a portion of the mortgage loan installment, contributions from banks, with the same profitability obtained by the fund and an initial contribution from the National Treasury. The Government’s proposal aims to “boost credit, activity, employment, local financial markets and reduce the housing deficit” while protecting the borrowed capital and covering eventual quota / income mismatches throughout the life of the loan. .
The program does not commit resources from either the National Treasury or the Central Bank of the Argentine Republic (BCRA). Details will be released once treatment begins in December.
Bye to the UVA?
The UVA mortgage loans were implemented in 2016 with the expectation of solving part of the problem around access to housing. Aimed mainly at the middle class, the initiative brought the possibility of owning a home with quotas similar or lower than those of a rent and income requirements lower than those necessary to access traditional loans. Nevertheless, After five years of sustained inflation, a fall in real wages, devaluations and other factors, the group of mortgage debtors under the UVA modality had increasing difficulties to sustain the payment of the installments.
“The evolution of the UVA was addressed, which rose less than inflation every year, with the exception of 2020. On the other hand, according to the Salary Index prepared by INDEC, it was noted that nominal wages rose 323% Between March 2016 and February 2021, general prices registered a rise of 385% (IPCBA), and the UVA unit increased by 391%. In other words, average nominal wages grew considerably less than the general price level (62 pp difference) and the UVA (68 pp). This shows a great loss of the purchasing power of wages in terms of all assets, in general, and of the credit quota, in particular, “said a report by the Public Defender’s Office .
Finally, it was found that the UVA unit increased at a faster rate than the rental price in the City of Buenos Aires: between 20116 and 2020, the rent of a two-room apartment increased an average of 399%, while that the UVA reached 412%. The difference is even greater if a three-room house is taken as a parameter: 381% versus 412%.
With this initiative, the Government seeks to promote construction and at the same time, try to improve the housing problem facing Argentina.