second mortgage interest rates

For 30-year-old Mexican Noberto Villalobos, 2004 was a very good year. After saving up some money over the last four years, Villalobos noticed that the Mexican real-estate market was attractive enough for him to get a loan and buy his own apartment. He wasnt alone.

Since 2001, construction on new houses has taken off due in part to low interest rates. In 2003, annual mortgage rates hovered around 18%, while today they are down to 12%.

I knew I had to seize the moment and buy my apartment, says Villalobos. The economy has been gaining speed over the last four years.

Mexicos gross domestic product has risen every year since 2001 due in large part to robust demand at home for goods and services. This year, the Mexican economy will grow between 3.5% and 4%, according to the Central Bank of Mexico, with the construction sector acting as a major driver behind output.

After years of weak performance, the real-estate market began to emerge from its shell as access to credit improved. The countrys banks almost closed their doors during the 1994 banking crisis, but today, they are back in business and eager to lend again.

In 2003, private banks approved 15,571 mortgage loans. Last year, that figure jumped to 29,318, according to the Mexican Banking Association, which includes 80% of the countrys banks.

Add existing mortgages into the picture, and the total number of housing loans es to 400,000, according to the association. There is still room to grow.

Last year, housing loans accounted for 2% of total loans, still a fraction of the overall loan market; credit cards, for example, represent 65% of the banking sectors total loan portfolio. The middle class was ignored in terms of credit, says Jesus Valdes Aguilar, purchasing director at Pulte Homes Mexico, the Mexican subsidiary of the pany of the same name, which controls 2% of the Mexican housing market.

There was no capital around for people to buy homes, and we werent even able to finance construction, but now things have changed with better interest rates. Last April, the Mexican government announced that before years end, mortgage insurance would be available to encourage financial institutions to approve more housing loans on even better terms.

The insurance aims to give banks the incentive to cut down-payment requirements to 10% from 20% of the total loan. Banks will also be able to buy and sell mortgage portfolios with one another in the open market.

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