Mexico's banks target wealthy in booming home market
Mexican banks flush with cash are targeting wealthier clients and women as a way to cash in on the country's surging mortgage market.
From Grupo Financiero Banorte SAB's program that focuses on lending to women to Grupo Financiero Santander Mexico SAB's mortgages for homes worth at least $131,000, the nation's biggest lenders are tailoring products to grab their share of the 14.6 million additional homes the nation is expected to add between 2010 and 2040.
Mexico, Latin America's second-biggest economy, is poised to grow faster than Brazil, the region's largest, for a second straight year, helping the expanding middle class buy homes. Even as some banks' rates excluding fees have fallen to 10 percent this year from near 13 percent in 2009, government data signals slower expansion in their mortgage holdings, as state-affiliated lender Infonavit controls 75 percent of home loans.
"The population of middle and high incomes has gotten stronger in recent years," Eduardo Torres, an economist tracking the real-estate industry for BBVA Bancomer, as the local unit of Banco Bilbao Vizcaya Argentaria SA is known, said by phone from Mexico City. "Banks haven't developed sufficient products for this population."
Mexican home loans grew by 10.1 percent in the 12 months through September to 443 billion pesos, according to the banking and securities regulator. In Brazil, outstanding housing loans jumped 39 percent to $122.1 billion over the same period.
The growth in the Mexican mortgage market has been outpaced by overall bank lending in the country, which expanded 12.5 percent in the 12 months through September. Credit card debt grew at 16.3 percent, according to the regulator known as CNBV.
Infonavit, the nation's biggest housing lender, is mostly focused on giving credit to lower-income groups often left out of the financial system, said Alfredo Rabell Manon, head of credit at the state-affiliated organization. While founded in 1972 to give workers access to home financing, it also caters to wealthier Mexicans by complementing larger mortgages with smaller Infonavit loans.
The lender has given 64 percent of its loans this year to borrowers who earn less than 7,579 pesos per month, according to the Mexico City-based organization. Annual interest rates charged by Infonavit range from 4 percent to 10 percent, depending on a borrower's salary.
Rabell Manon said about 30 percent of the economically active population is served by government-affiliated organizations such as Infonavit, providing a "growth market" for commercial banks.
"The market is very big and little utilized," he said in a telephone interview from Mexico City. Increased competition from banks hasn't cut into Infonavit's portfolio, as the biggest competition is in lending to the wealthier borrowers, he said.