Making mortgages easier in Argentina

As we are currently in Argentina I thought it interesting and good that the government has just changed their rules for mortgages.

The reason for this is that the housing market is experiencing a large demand from both foreign and local investors alike. This has caused rental prices to surge making people unhappy.

The government has already said that they wouldn’t start rent control although I wouldn’t discount it from a populist party like the Peronistas. However I think they are rightly more concerned with this flow of foreign investment right now.

As far as I understand the current rules allow lending up to 80 of the property value. The monthly payment also has to be less than 30 of the household income. As property prices are high and incomes relatively low this probably cuts a large chunk of the middle class out of the property market.

So their plan to make it easier for regular people to buy property is a great step forward. The plan is targeted at people who are currently renting. So the first requisite is to have paid your rent on time for the last 8-12 months. You can then borrow for a property where your monthly payments would be the same as your current rent.

The banks can then finance 100% of properties up to AR$200K (~US$66K) and 90% of properties up to AR$300K (~US$100k). This does make it a lot easier than before. Although there still is the problem of high interest rates. There has been some talk about subsidizing interest rates but I doubt that would be a good idea. It would be a much better plan to let them fall naturally as the economy improves.

To me this whole thing sounds like one of those great simple economic hacks that make a lot of sense. If someone has been paying rent for 8-12 months it is a pretty good indication that they could handle the mortgage payments at a similar level.