The increases in the reference rate by the Bank of Mexico (Banxico) –initiated in May 2021– to try to contain inflation, have already begun to be reflected in the costs of some types of bank consumer credit.
From May 2021 to date, the central body has increased the reference rate by 375 basis points, going from 4.00 to 7.75 percent. Given the high inflation that remains, it is expected that a more restrictive trend in monetary policy will continue.
As expected, this rise has already begun to be reflected in the interest rates of some consumer loans granted by commercial banks, mainly personal and microcredit, as well as credit cards and others that are at a variable rate.
According to the “Analysis of credit indicators of Banxico”, while the average interest rate for personal loans and microcredits was 45.77% in April 2021, as of February 2022 it was 46.46%, an increase of 69 basis points .
In this portfolio, Scotiabank, Banamex and HSBC are the ones that register, based on the information from the same tool of the central agency, the lowest rates with 22.66, 25.44 and 27.44%, respectively.
Meanwhile, in credit cards, the average rate in banking went from 33.29% in April 2021 to 34.31% in December of that same year, an increase of just over 1 percentage point, and even without registering the data of the last months.
Here, the banks that reported the lowest rate as of December 2021 were: Banregio with 23.01%, HSBC with 25.39% and BBVA with 30.26 percent.
In payroll loans, it went from an average interest rate in the system of 26.26% in April 2021, to 26.92% at the end of February 2022, an increase of 66 basis points in the period; while in automotive the rise has been more marginal, going from 12.46 to 12.55% between April 2021 and the second month of 2022, an increase of 0.09 points. It should be remembered that, given the problems that prevail in global supply chains, sales and therefore the financing of new cars have shown a weak recovery.
As for mortgage loans, the rates remain below 10.0%, because while in March 2021 the average was 9.13%, in the same month of 2022, it decreased to 9.04 percent.
Specialists point out that, in this case, since the rates associated with mortgage loans are longer-term, the impact would be seen later. The banks that register the lowest rate in this product are BBVA with 8.55% and Ve por Más with 8.85 percent.
Increases would moderate recovery
Jorge Sánchez Tello, director of applied research at the Foundation for Financial Studies (Fundef), estimates that the increase in interest rates will moderate the recovery that is taking place in loans, especially those with variable rates such as cards, payroll, personal and microfinancing.
It is worth mentioning that in recent months the consumer portfolio has recorded real growth, and in fact it is the portfolio that is driving the increase in bank loans.
The specialist commented that, however, it is important to highlight, for example, that in credit cards, between 55 and 60% of those who have this product are totaleros, so they would not be affected by the rise in rates for this product.
It is complex to know exactly how much they are going to rise, because it depends on the type of client and the risk. Sometimes there is a 1 to 1 relationship with the increase in the Banxico rate, but sometimes it is less or more, because it also depends on the competition that the product has, “he said.
He said that although banks today – after the Covid-19 pandemic – have the resources to grant credit, they have to do so responsibly. “So we expect moderation and prudence in the coming months in the face of rising interest rates and low growth in the economy.”
It would represent greater profitability for entities
A report by Moody’s Investors Services released the day before, states that this upward trend in the reference rate will have a positive effect on Mexican banks, given that their profitability will increase, especially in the portfolio of companies.
In fact, the report indicates that commercial credit rates are usually associated with the 28-day Equilibrium Interbank Interest Rate (TIIE), which results in an average annualized implicit rate of 7.9%, an increase of 134 basis points in the 12 months to April of this year.
However, the rating agency considers that there could also be a deterioration in credit quality, since, given the high inflation, people’s ability to pay could be affected.