Friday 31 March 2023

Loans in dollars loses attractiveness for those who earn in colones

The exchange risk and the drop in rates in colones counteract the stimulus of cheaper fees

Paying the bills


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31 March 2023 - At The Banks - BCCR

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QCOSTARICA – Loans in dollars, which had a great boom in 2000, began to slow down since 2016 and today, despite the fact that rates are still lower than in colones, it is no longer so attractive for those who do not have income in colones

María Villalobos, of the Banco de Costa Rica (BCR) at Expocasa 2014. Loans in dollars have shrunk at State banks. Photo: Mayela López

In 2020, loans in foreign currency fell 3.7% and for 2021 and 2022 the Central Bank estimates that it will not grow, as detailed in its 2021 and 2022 Macroeconomic Program.

The contraction has been concentrated in state banking, where, as of May 2017, the balance of loans in dollars, expressed in colones, began to fall.

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The General Directorate of Institutional Relations, Advertising and Sustainability of the Banco Nacional (BN) explained that the reduction is due to the fact that the recoveries in dollars have not been offset by new loans.

Meanwhile, among private banks, which have dominated this market, loans in dollars have remained stable, especially since 2019.

As an example, because there are many other factors to consider when applying for a loan, in the current housing fair, the monthly payment for a mortgage loan for ¢50 million colones with a 30-year term at Davivienda, starts at ¢425,864 colones, while for a 30-year mortgage of US$82,000, it starts at US$557 (about ¢340,000).

At the Banco de Costa Rica (BCR) a mortgage loan for ¢50 million with a 30-year term, at a rate equal to the basic rate (3.45% currently) plus 2.43%, the initial monthly payment is ¢330,704 including insurance policies for life, unemployment, and fire.

For a loan in dollars for US$82,000, but for 25 years, with an interest rate of 7.50% from the first to the third year, the initial payment is US$613 (almost ¢374,000). The colonized dollar quota is slightly higher, but the term is five years shorter.

“Previously, the monthly payments of a loan in dollars were somewhat favorable when compared to in colones. Today, interest rates in colones have undergone a downward adjustment and that tends to be an additional incentive for clients when defining the currency of the loan,” said the BCR through its press office.

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In 2000, loans in dollars represented almost a third of total loans (34%), but such was their boom that in April 2004 they reached almost half of the total (50%). By January 2021, the participation was again lower, reaching 37% of the total.


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