Loan interest rates could fall due to BCRP cut

Since January 2023, the reference interest rate has been set at 7.75% by the Central Reserve Bank of Peru (BCRP), and until July, the entity specified that its decision did not imply the end of the cycle of increases. However, in August it was only noted that future rates will be subject to the evolution of inflation, leaving open the possibility of starting the cut.

For its part, the Ministry of Economy and Finance (MEF) reported that although reference rates in the world remain high, in Latin America the situation is different. The reduction in inflation is causing some central banks to also adjust their rates, as in the cases of Brazil and Chile.

“What the market consensus expects is that in the second half of the year more central banks in Latin America will reduce their interest rates and that will boost the economies of the region,” said Alex Contreras, head of the MEF, during his participation in the II Regional State Council (CER).

main influence

Active interest rates, referring to the money disbursed by financial institutions to individuals and companies, are already showing a reduction due to the expectations of cuts by the BCRP.

for the economist Ronald Casana, there is already a downward trend, although it is still slight. In September it will be possible to know the real impact of El Niño, with which the BCRP would choose to vary its rate in October.

“The reference rate would drop in October. In November it settles down and just the banks (will adapt) their rates between 1 to 2 months,” he told La República.

Regarding mortgage loans, the average rate in June was 9.56% and in July it reached 9.49%. In the case of consumer loans, in both months they have remained at 50.39%, when the trend was upward since 2022, according to the latest BCRP report.

In a scenario in which the reference rate falls, the rates of mortgage and corporate loans will be the first to decrease, since they are up to 90% related to the monetary program, affirms Casana.

While the also economist Enrique Diaz He refers that consumer credit rates would also be affected, since with low inflation, banks will seek to gain more users for this type of card.

The El Niño factor

On the other hand, the rates for companies will fall to the extent that other factors influence.

“The reference rate is one of the various factors that will determine the final rate that banks cover. Equally or more important is, for example, the delinquency rate have the wallet. If the portfolio behaves badly, that is, they have payment problems, the rates will not go down, because the financial entities have to recover what they have lost,” Diaz explained.

In this way, if El Niño has a very negative impact on the country, this will prevent this reduction process from being “very fluid”.

Finally, the passive rateswhich is what financial institutions pay for user deposits, will also be reduced, closing a cycle of increases that have not been seen for more than a decade

Opportunity: renegotiate interest rates

In the first quarter of 2024, if a user has a 20-year mortgage with a rate of 10%, what can happen is that another bank offers to buy the debt at a lower rate, which could be 7%, the The customer can choose to accept the offer or tell their bank to match the offer, explains Ronald Casana.

“All clients who have taken out mortgage loans in the first half of 2023 will be able to renegotiate rates. That they reduce 1% of an average credit of S / 200,000, we are talking about a saving of S / 30,000 ”, he sums up.

Variations in average rates in the financial system