Mexico's Mortgage Market on Good Track Despite Challenges

Q: In 2018, the mortgage market posted a good track record. How has that changed after the pandemic?

A: The mortgage industry in Mexico has not experienced the same sharp declines as other sectors. In 2020, the entire mortgage industry closed with 2 percent growth. The fact that we have grown so much while the economy fell by more than 8 percent is a very important achievement. Last year, however, we experienced a very sharp drop in mortgage lending in 1H21. Everything indicated we would have a catastrophic year but I believe that banking in Mexico reacted very quickly in two positive ways.

First, at the beginning of the pandemic, the banks announced extraordinary support for people who had taken out a mortgage, car or personal loan. The banks refinanced their loans for three months and then extended them to a maximum of six months. This helped people have better cash flow. Secondly, the fall in mortgage interest rates last year also helped. This contributed much to the reactivation of interest in acquiring a loan. Despite uncertainty in the market, many people were motivated to buy real estate. 

Thirdly, banks became very conservative in their lending criteria. They did not stop lending. Instead, they identified which industries were being hit the hardest, including tourism, restaurants and aerospace, and applied more selective lending criteria. For the rest of the economy, the criteria remained almost the same, always encouraging people to venture out and take out a loan, even during the pandemic. These three elements made 2H20 a really positive period for us. Banks also launched new products. For example, Santander launched a new service called Hipoteca Free, which offered free insurance. This led to a record year for that bank in terms of loan placements. Many banks also innovated certain products and services to make them more accessible and more attractive to people. 

Since 2018, a factor that we continue to consider and that gives us confidence in the market is that the average population in the coming years will be around 28-29 years old, an age at which people are starting to consider buying a home. There is a viewpoint that millennials do not want to buy a home and that they prefer to rent. I share this view but it is also true that for someone to be able to rent a house, others first have to buy it. In Mexico, it is estimated that there is a housing deficit between  8 and 9 million and every year new couples join the economy. 

Mortgage replacement loans or liquidity loans are additional products that have helped the mortgage market keep a fresh spark, unlike other industries.

Q: What are some of the requirements your clients are demanding that you believe will remain even after the pandemic?

A: The need for credit has not changed much, although lower costs are being prioritized. For example, HSBC recently came out with a new service where you can start repaying a loan from 2022. Throughout most of the year, banks have been running promotions in which the origination fee and appraisal fees are waived. I think people have shifted their vision toward a healthier lifestyle. As remote or hybrid work has become more popular, most companies are no longer considering going back to a 100 percent face-to-face model. This has caused many people to move from Mexico City to other cities, introducing a new dynamism to the industry as people have moved to Morelos or Queretaro. The features of housing have also started to change because now many real estate developers are thinking of including work areas in their developments, for instance. 

Q: What do you consider key highlights that have helped position the company in Mexico?

A: Creditaria was founded in Spain approximately 20 years ago. During its expansion process, the company expanded to Portugal, while Mexico was its first venture in Latin America. The country has undoubtedly been one of the most fruitful for the company because of our franchise model. Today, we have around 600 locations throughout the country. That has been one of our main successes and a big part of the great triumph of the company in Mexico.

When we arrived in Mexico, we realized that we had two main needs. The first was to build a portfolio of alliances with financial institutions that would allow us to become mortgage brokers. We also realized that the business model we had in Spain did not work in Mexico. In Madrid, we had a centralized operation and through telemarketing, we served the countries of Spain and Portugal. Here in Mexico, we tried the same dynamic but it went terribly wrong at the beginning. At that time, there was a lot of buzz about so-called “express kidnappings” and people in other states did not trust us to provide their sensitive data over the phone. Most were attracted by our proposal but overcoming that distrust was almost impossible. As a result, we decided to open an office in every state in Mexico.