The interest rate is always a very important issue in the financial market, especially when it comes to credit aimed at real estate acquisition. As the amount is greater than other, more basic hires, this is the “portion” of people who most tend to see big differences in monthly payments or in service contracts.
For those who don’t understand anything about the subject, it is worth saying that interest is a kind of “cost” on a monetary amount. Those who lend the money charge this percentage more in order not to lose the value of their capital due to inflation and, in addition, to obtain an additional profit for future financial operations or negotiations.
Obviously the interest rate depends on several economic factors, including the risk calculation and numerous other inherent particularities of these transactions. Today, we’ll talk about the topic in a more simplified way, and we’ll let you know what the projections are for a shorter future.
For this, we have the help of Igor Vieira, Cyrela’s executive manager, who is a reference in this subject that usually generates numerous doubts. Interested? Read on until the end!
Why should the interest rate rise in the coming months?
The projection for the interest rate is high. Not long ago, the Central Bank, together with the Monetary Policy Committee (COPOM), announced an increase in the SELIC rate to 2%, causing this index to rise to 2.75% per year, a number expected by most of the financial market institutions.
It is important to say that this index – or rate – is a kind of guide for all financial institutions in the country, where most of the calculations on credit and other financing use this data to be able to guide their negotiations.
For the next few months, it is expected that the upward trend will continue, and it is likely that by the end of 2021 the SELIC will be at a percentage of around 3.5 to 4% per year. For 2022, it is harder to say, but this trend is still expected to continue rising. In general terms, this projection indicates that real estate financing, in particular, should increase over time.
How is the interest rate calculated?
The SELIC rate (Special System for Settlement and Custody) is the national reference for calculating interest in the financial system. One of the main functions of this rate is to control our inflation, in addition to being an important “thermometer” for controlling the issuance, sale and purchase of government bonds (raising funds for Federal Government shares).
SELIC is complex and has a very comprehensive calculation, making it difficult for a citizen without technical knowledge to fully understand how this index works in reality. To get around the problem, the Central Bank of Brazil made available a citizen calculator that facilitates the calculation of some of the most common financial transactions.
On the same site, it is possible to use other important market markers, such as: savings, CDI (Interbank Deposit Certificate), TR (Referential Rate) and other national price indexes.
Why is it important to know about these interest rate projections for the future?
As mentioned, the SELIC is used as a basis for calculating interest for numerous credit services in the financial market, including real estate credit in its most different forms. The financing housing, for example, often use the savings as a correction to the displayed values.
This calculation involves a fixed rate (SELIC), the Referential Rate (TR) and savings. When the SELIC is below 8.5%, the correction of savings is equivalent to 70% of the amount borrowed. When the SELIC exceeds 8.5%, the savings income is 0.5% per month with the additional TR.
Generally speaking, this means that both the income from the savings account and the amount of interest used in a loan agreement can change considerably with the economy. When we talk about long-term financing — as is the case with real estate — this difference in costs can be significant.
How does interest impact the purchase of a property?
As you may already know, the higher the interest, the lower the purchasing power of the final consumer. Therefore, it is always important to fight for the lowest rates so that, in the long term, you can accumulate capital to pay off your debts and increase your equity.
In March 2021, the increase in the SELIC rate has not significantly affected the real estate market, which today has the lowest rates in history, bordering on around 6.7 and 6.9% + TR.
How to take advantage of this moment of lower interest rates?
For those who have the financial capacity to purchase a property at this time, this historic low in the country’s interest rates corresponds to one of the best opportunities ever, especially when we take into account the traditional financing model that takes into account the fixed rate and the reference rate as a calculation.
However, for those who will use credit lines that also take savings into account, this trend of high interest rates may not be the best alternative for acquiring a property, given the considerable increase in interest rates in the medium and long term.
Should the pandemic influence the interest rate in the coming months?
Generally speaking, yes. The pandemic reduced and changed our consumption pattern and this retraction negatively affects the SELIC. The positive aspect is that there are national markets that are expanding widely, such as the e-commerce market, for example, which grows at an amazing speed and continues to reach new growth milestones.
This means that the better we adapt, the faster we will return to our usual consumption and, consequently, we will be able to keep our interest rate at a low standard and within what is expected.
How can the buyer organize to buy a property at that time?
The ideal now is to look at your capital and understand, first of all, that conscious buying is one of the best alternatives an individual has to protect their investment and increase their wealth in the long run. It is possible to use the moment, however delicate, to get big deals, without having to take big risks. Today there are excellent lines of credit for those who want to purchase their own home in a prudent and secure way.
Furthermore, it is noteworthy that in order to overcome this moment of the pandemic, we need a collective effort, with the use of a mask and social distance. If we all play our part, in a short time we will be stronger and with an even more heated market for the future, which despite the increase in interest rates, is promising.
We would like to mention that Cyrela is one of the largest real estate builders and developers in Brazil. We are a reference in the real estate market and we are always available to help the client obtain the best purchase conditions, either with lower interest rates or with the best properties in Brazil. So, count on us and be sure that this uncertain moment will pass with our collective effort.
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