Over the past thirty days, currency and interest rate volatility has led many people to reconsider UVA loans . This is especially true for those who had previously taken out this type of financing or were considering doing so. Undoubtedly, those most affected are those in the final stages of the loan application process.
One of the most important economic decisions for families in Argentina consists of purchasing a house. In addition to including emotional factors, such as belonging, security or even a certain sense of fulfillment; This decision requires having a certain amount of money that most families do not have.
To afford their own home, many families need a mortgage, which represents a long-term investment. This debt involves committing, through a contract with a bank, to pay the value of the financed property, which includes not only the principal but also the interest.
In the first instance, it is important to know the type of mortgage loan that is needed. This depends on the particular and financial situation of each family. In fact, there are usually different mortgage loans within the financial system, although in countries like Argentina this market is not usually developed or the entry conditions are accessible to few. Which also has an impact on the learning curve of the population to use these tools, enjoying the benefits, but also avoiding the hardships.
Current data indicate that the lack of housing and the need for repairs affects 1 in every 4 homes in the country, which is why in recent years programs have been developed in order to address this problem that has been growing in the last four decades. . Likewise, as shown in the following graph, the mortgage credit rate as a percentage of Argentina's GDP is relatively low, even in the Latin American context.
To address this problem, the ProCreAr program was developed in 2012 to provide greater flexibility in accessing mortgage loans compared to traditional lending methods. This allows a larger portion of the population to be selected to receive these loans.
While this program resulted in approximately 150.000 loans being granted between 2012 and 2015, the current government decided to modify it in 2016 based on a system new to the country: a new type of loan adjusted by Purchasing Power Units (UVAs), a fictitious unit of measurement created by the Central Bank of Argentina (BCRA) to promote mortgage lending and avoid accelerating inflation. Under this system, the interest rate remains fixed throughout the loan term, and the debt is denominated in UVAs.
As with any loan, borrowers face the uncertainty of being able to repay it. This report attempts to explain the reasons for the creation of this type of mortgage, its advantages and disadvantages, and its level of acceptance in society, particularly in a country that tends to experience very pronounced economic cycles. It also includes a brief analysis of other loan applications, such as secured loans and fixed-term deposits.