Low interest rates and real estate financing: what's the connection?
You've certainly heard of the Selic interest rate, right? But do you really know how this rate affects your day-to-day life, more specifically when it comes to buying real estate?
The fact is that with this low interest rate, buying real estate is becoming an even better deal! That's why it's so important to understand the relationship between interest rates and buying and selling real estate in order to get a good deal!
Below, you'll learn more about the Selic rate and its relationship with the real estate market. Follow along!
What is the Selic interest rate?
Selic stands for Sistema Especial de Liquidação e Custódia (Special Settlement and Custody System), i.e. the basic rate of the Brazilian economy. This rate is raised, for example, when inflation rises, increasing interest rates and curbing consumption. As a result, prices fall and the economy is controlled. In theory, the Selic rate is a thermometer for controlling Brazil's economy.
On the other hand, low interest rates are used to boost the market. The Central Bank usually lowers interest rates when the economy is slow. As a result, prices are low and payment conditions are easier, increasing purchasing power and thus boosting consumption.
What is the relationship between low interest rates and buying real estate?
When the Selic rate drops, banks also have lower costs, which means that this drop is passed on, in part, to the financing and loans that the institution makes to its clients.
If you're looking to buy a property, it's worth taking advantage of when the interest rate drops, as this is the benchmark for other fees in your financing, such as risk, tax and profit. In short, it is the base that will guide other rates, so paying attention when it falls is a great way to get a good deal and finance your apartment.
What is the current situation with the Selic rate?
Due to the Coronavirus pandemic, the Selic rate reached the lowest rate in history, reaching 2% in August 2020. Due to the uncertain scenario, the Central Bank's idea is to reduce the rate to heat up the economy and encourage consumption, so that the country can balance itself out.
For their part, banks are offering very good financing options for those who want to buy a property. The increasingly low interest rates are attractive for those who want to finance and, at the same time, not pay exorbitant fees.
Ready to buy your first property? Then how about getting ready to choose your apartment well? HereYou can check out what to look out for when taking this important step and be sure of getting a good deal!
