since The central bank started the process of raising the interest rate (Primary interest rate), in March last year, Brazil’s access to credit also became more expensive. Central Bank data shows that families are paying more to finance the purchase of their homes and cars, two of the main credit operations for individuals.
The bad news is that the cost will likely continue to rise. Analysts heard UOL claims that, with Inflation continues to accelerate, BC tends to continue raising Selic, currently at 10.75% YoY. As a result, interest rates on mortgage financing and lines of credit for car purchases will also be higher.
In practice, financing a home or a car is actually more expensive. The cost may rise in the coming months.
Escalation BC numbers show:
Interest rates in the selected months (% per annum):
- February 2021: two% (Selic); 7% (Real estate); 20% (vehicles)
- March 2021: 2.75% (Celec); 6.9% (real estate); 20.6% (vehicles)
- May 2021: 3.50% (Celec); 6.6% (real estate); 21.3% (vehicles)
- June 2021: 4.25% (Celec); 6.7% (real estate); 21.6% (vehicles)
- August 2021: 5.25% (Celec); 7% (real estate); 22.7% (vehicles)
- September 2021: 6.25% (Celec); 7.2% (real estate); 23.9% (vehicles)
- October 2021: 7.75% (Celec); 7.5% (real estate); 24.8% (vehicles)
- January 2021: 9.25% (Selic); 9.4% (Real estate); 26.9% (vehicles)
But what is the impact on the pocket?
A high interest rate on a loan may not seem like much, but it makes a big difference in the final cost.
Professor of Financial Mathematics José Dutra Vieira Sobrinho, of Fipecafi (Constituent Institute of Accounting and Actuarial and Financial Research), simulated, upon request UOLImpact of high interest rates on a 30-year R$300,000 mortgage. The payment system considered was SAC (Continuous Consumption System)One of the most common types of financing is through banks.
The results were as follows:
- Carefully 7% per year (As of February 2021): The first installment is R$ 2,543.33 and the last is R$ 838.08. The total amount to be paid is 608,655.00 BRL.
- Carefully 9.4% per year (In January 2022): The first installment is R$3,083.33 and the last is R$839.58. The total amount to be paid is 706125.00 BRL.
The calculations did not take into account any kind of cash restatement, nor the insurance payment of premiums. Usually, a real estate contract provides for the payment of interest plus an index, such as TR (Reference Rate). In addition, there is usually an increase in premiums related to insurance for death, permanent disability of the owner and material damage to property.
In the simulation, the effect of higher interest rates is obvious. Whoever finished the credit process in January of this year, at a rate of 9.4% per annum, will pay an additional R$97,470.00 to finance their home.
The rate of interest means the cost of money. There are people who only care about the value of the premium. But you need to worry about the cost of fees. It is always better to borrow at the cheapest rate.
José Dutra Vieira Sobrinho, Professor at Fipecafi
Dutra Sobrinho also draws attention to the fact that with higher interest rates, premium values are higher. This may be an obstacle for the customer to close credit with the bank. Usually, in a mortgage loan, banks accept a commitment of a maximum of 30% of the family income.
In other words, if the value of the premium exceeds 30% of the income, the transaction is not closed.
Buying a car is also more expensive.
The Dutra Sobrinho simulation also shows an increase in cost for those who will buy a car.
In financing 60,000 Rls for a car for 5 years, the terms are as follows:
- Carefully 20% per year (In February 2021): Installment 1,535.38 Brazilian Real. The total amount to be paid is 92122.80 Brazilian Real.
- Carefully 26.9% per year (As of January 2022): Installment is R$1726.08. The total amount to be paid is 103.564.80 Brazilian Real.
The calculation does not take into account the collection of IOF (financial operations tax), which is usually incorporated into an annuity. The figures show that from February 2021 to January of this year, the cost of buying a car under these conditions was R$11,442.00.
It is worth remembering that prices Vehicles have also become more expensive. In Brazil, amid parts shortages during the COVID-19 pandemic.
Experts say the impact of higher interest rates is brutal
The impact of higher interest rates on financing contracts is “brutal,” says Executive Director of Studies and Research at Anefac (National Association of Financial Executives), Miguel Ribeiro de Oliveira.
According to him, customers also have to deal with more restrictions on access to credit. Oliveira cites The high level of unemployment And economic difficulties as factors to increase the risk of default.
In general, credit conditions worsened a lot. This is because the interest rates are higher, but also because the banks are lowering the financing terms a bit. Institutions are more restrictive.
Miguel Ribeiro de Oliveira, CEO of Anefac
Cilic will continue to rise
With the progress of inflation, especially from the second half of 2020, the central bank in March last year began the process of raising the negative interest rate. With interest rates on the rise, BC seeks to keep prices high in Brazil.
The problem is that with the rise of Selic, the cost of raising money by the banks also goes up. The result is that financial institutions pass financing costs on to financing. This is one of the reasons for the high interest rates on home financing and car purchases.
Economist Isabella Tavares, credit specialist at consultancy Tendências, recalls that with inflation continuing to accelerate, expectations are that Selic will continue to rise.
The scenario is that Cilic will continue to rise until the first half of this year. Therefore, the impact on interest rates of credit operations will continue. For the second half of 2022, we also expect a price increase due to a delay. As much as Selic stopped rising at the end of the first semester, the effects on interest rates are still continuing into the second semester.
Isabella Tavares, Economist at Tendências
The BC Focus Bulletin, which compiles financial market forecasts for key economic indicators, indicates that the rise in Selic’s rate, currently at 10.75% annually, will continue until May, when it will reach 12.25% annually. After that, it will remain stable until the beginning of 2023, when it will begin to fall. Only from this point onwards can interest on loans to individuals also be earned.
But Isabella Tavares believes that this scenario will depend on inflation. “If inflation rises further, BC will have to be more aggressive with Selic, and the effects will still be felt in credit. The credit risk of banks will also increase.”
Funding now or later?
Professionals have heard before UOL He mentioned that due to the higher cost of financing, it might be a good idea to wait for lower rates.
“Unless it’s necessary, you should put off any financing plan, precisely because the cost is higher,” says Miguel Ribeiro de Oliveira of Anefac. “This whole situation, at some point, passes.” “Forget about it this year. Interest rates are high and will continue to rise. If financing is urgently needed, do it now. But for those who can, it is better to wait a few years, because prices will be lower.”
Dotra Suprinho, of Fipecafi, says the decision whether or not to make a loan now depends on the stakeholder’s perception of the future of inflation and interest rates.
“If one thinks that things can get better, despite the epidemic and the war situation there in Russia, then you’d better take a break,” he says. “Within six or seven months, everything could change,” he adds.
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