The Government Announces the Implementation of Facilities to Mitigate the Increase in UVA-Adjusted Mortgage Loan Installments
- Starting in February and for 12 months, the Government will implement an installment convergence mechanism for UVA-adjusted mortgage loans, in a shared effort between financial institutions and debtors.
- This mechanism avoids the 26% leap in the installment expected as of February establishing, instead, a 12 month-convergence period.
- In no case may the installment exceed 35% of the household income.
January 28, 2020. The BCRA agreed with the Ministry of Territorial Development and Environment of Argentina to implement an offsetting mechanism to mitigate the rises in UVA-adjusted mortgage loan installments that debtors should face in February.
The end of the freeze established as of August 2019 by the previous administration would imply a 26% rise in installments.
In order to avoid such a sharp increase, an offsetting scheme will be implemented to allocate within a 12-month period the increase that was supposed to be charged as of February.
To ensure this convergence process and in line with the shared effort initiative established in the Social Solidarity and Productive Reactivation Act, financial institutions will contribute a total of ARS1,411 million during the applicable period.
Para garantizar este proceso de convergencia y en consonancia con el criterio del esfuerzo compartido establecido en la Ley de Solidaridad Social y Reactivación Productiva, las entidades financieras aportarán un total de $1.411 millones durante el plazo de vigencia del mismo.
Example of the installment convergence scheme:
- In the case of a loan with an installment of ARS12,000, the expected 26% increase would imply that figure rocketing to ARS15,100 as of February 2020. Under the convergence mechanism, the installment will increase to ARS12,600 (up 5%).
- In the case of a loan with an installment of ARS24,300 in January (taking the maximum loan amount qualifying for the freeze), the installment would increase to ARS30,700 in February (up 26%). With the convergence mechanism, the installment to be paid in February will amount to ARS25,700 (up 6%).
It was also determined that should the installment to be paid exceed 35% of the debtor’s household income, financial institutions must set up a scheme to promptly address such cases.
As a result of the credit policies implemented by the previous administration, the burden of UVA mortgage loans fell, mostly, on public banks. The cost of the freeze implemented (ARS690 million from September 2019 to January 2020) was financed using the funds from the PROCREAR trust, an instrument originally intended to build homes.
According to the survey carried out by the BCRA, there are currently a total of 105,000 UVA-adjusted mortgage loan debtors, out of which 95,000 have loans of up to 120,000 UVAs intended for a single housing unit residence.
