Abstract:
In this paper we will discuss about the mortgage market in Brazil. Earlier, lending in Brazil was almost impossible due to high interest rates. But now, the government takes several initiatives to improve the mortgage sector.
Before 1994, mortgage lending was pretty impossible in Brazil by reason of high rates of interest. The country's economic condition was not stable and inflation was high. The government planned to create such an environment so that demand for home and long term funding will increase.
After the period of instability, Brazil's mortgage market grew slowly. The government introduced a housing finance regime. Despite that, the mortgage market was not able to accommodate the increase in household demand. However, recently the situation is changing slowly.
The Brazilian government was forced to change the mortgage laws due to lack of available homes in the country. Currently, housing shortage in this country is approximately 9 million housing units. Still 20% of the total population do not have acceptable houses.
In 1998, the Association of Home Loan and Savings Entities in Brazil estimated that almost 400 billion US dollars of additional funding, which is equal to 13.5% of the Gross Domestic Product, would be required to fulfill the demand for home.
Therefore, the government adopted several plans and reforms to improve the mortgage market. As a result, presently, more Brazilians are able to have a secure housing. Not only that but the demands for mortgage financing are also increasing.
Of late the Brazilian government has introduced several policies to make mortgage financing efficient. The main intention is to minimize the insolvency risk and costs. The government is allowing liquidity
in the mortgage loans. Therefore, a robust and mortgage backed security market is now growing slowly in Brazil.