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Financial Reforms Encourage Competition Among Mexico Mortgage Lenders

03 January, 2016

Financial changes that began as part of a major series of reforms in Mexico that were initiated by President Enrique Peña Nieto in the fall of 2012 have increased competition among Mexico mortgage lenders,Business Wire reported. Making it easier and more cost effective for borrowers to transfer from one bank to the next while also checking the upward movement of lending rates on mortgage loans,according to Fitch Ratings.

“Mexico’s reforms were enacted in January 2014 under the Law of Transparency and Promotion of Competition within Guaranteed Credit,which took effect Aug. 20,” writes Business Wire. “Mexico is hoping that better transferability of mortgage loans will result in competition that aids home affordability across the market.”

Although mortgage transfers have been possible in Mexico prior to the reforms,their high costs deterred many customers from transferring to a new bank in order to obtain a better interest rate. Today,Mexico mortgage borrowers – including bank customers – are showing lower than ever delinquency rates and excellent growth history overall,since mortgage loans in Mexico are generally only granted to customers who exhibit a lengthy positive credit history and have demonstrated strong payment ability.

“The average interest rate on mortgage loans offered by banks has fallen to 10.59% as of June 2015 from an average of 12.80% in 2008,” writes Business Wire. Fitch expects Mexican banks to continue achieving fair growth in mortgage lending as slower increases in rates should keep mortgage rates competitive for borrowers.” 

Banks in Mexico have also fostered sustainable growth for the foreseeable future by maintaining attractive margins amid more restrictive liquidity rules that work to encourage a spike in long-term funding as a way to mitigate challenges with asset liability. In addition,a new Fitch Ratings report released in October that the supply of mortgage loans in Mexico has diversified in recent years thanks to the increasingly competitive environment,low level of interest rates,recovery of the construction sector and growing real estate market. 

“In Fitch’s view,the new structural dynamics in the Mexican mortgage industry has enlarged the product range offered by the entities involved in the industry,including state-owned lenders and private lenders,” writes Reuters. “It has [also] made them adapt to the new housing needs in the country.” 

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