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Caixa Sees Home Equity Growing Twice as Fast as Consumer Credit

Caixa Economica Federal, Brazil’s third-biggest bank by assets, said home-equity lending will expand twice as fast as growth in the nation’s consumer credit market next year as borrowers seek to refinance debt.

Home-equity loans provided by the Brasilia-based federally controlled bank will increase more than 30 percent in 2014, while consumer credit nationwide expands as much as 14 percent, Edilo Ricardo Valadares, Caixa’s executive director for clients and retail strategy, said in an interview.

Caixa’s book of consumer credit secured by real estate assets was about 6.5 billion reais ($2.8 billion) at the end of November, Valadares said. The total loan book was 463.4 billion reais at the end of the third quarter, according to the company’s earnings statement.

“Home-equity loans charge lower interest rates and have a maturity of 240 months or 300 months that you don’t find in other consumer credit lines,” Valadares said. “People tap home-equity loans to restructure their debts, extending maturities, or even to invest in a business.”

Household debt in Brazil rose to a record in August of 45.4 percent of families’ annual earnings, as inflation remained above the government’s target of 4.5 percent since 2010. Debts dropped to 45.3 percent in September, the first decline since December 2012, according to data from the central bank.

Caixa charges clients a monthly interest rate of 1.1 percent to 1.49 percent on home-equity loans, Valadares said. The bank’s consumer credit line has an average interest rate of 3.06 percent a month, according to the central bank. Brazil’s Selic benchmark interest rate is 10 percent a year.

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