Since last year there has been a constant call from the National Government and businessmen to the Bank of the Republic to accelerate the reduction of its interest rate, which in May 2023 reached a maximum of 13.25 percent.
According to the criteria of
They argue that this It is necessary to reactivate the Colombian economy, which in the first quarter of the year had a timid growth of 0.7 percent, according to the Dane.
In December 2023 The Bank of the Republic began to reduce its rate and is currently at 11.75 percent, The decrease has been 150 basis points.
However, The Issuer’s adjustment to the intervention rate has occurred at a slower pace than that observed in other economies in the region like Peru, Chile or Uruguay.
This is due, according to the manager of the Bank of the Republic, Leonardo Villar, to the fact that The inflation rates of these countries are very close to their goals, something that does not happen in Colombia.
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The financial sector anticipated the cycle of cuts carried out by the Issuer
Although inflation has fallen by 618 basis points since its peak of 13.34 in March 2023, and was at 7.16 percent in May, it is still more than 4 percentage points above the Bank’s target.
According to the Minister of Finance, Ricardo Bonilla, the members of the board of directors of the Banco de la República agree that the reduction must continue and, therefore, they hope that At Friday’s meeting, the discussion will focus on whether the adjustment should be 50 or 75 basis points.
Although The Government assures that the reduction of the rate must be more aggressive than it has been until now with reductions of 25 and 50 basis points, Asobancaria points out that The financial sector “anticipated the cycle of cuts carried out by the Issuer.”
This effort, according to the union, has been made with the objective of benefiting users and boost Colombia’s economic recovery process.
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This means that Interest rates for households and businesses have fallen And, ultimately, this is what is sought so that interests are not pointed out as a brake on the economy.
Indeed, while the Banco de la República rate fell by 125 basis points between March 2023 and mid-June 2024, In the case of the consumption modality, the decrease for the same period was around 626 basis points.
While the interest rate on commercial loans was reduced by 456 basis points, the rates on credit cards and home purchases fell by 1,304 and 399 basis points, respectively.
For Asobancaria, these figures show “the banks’ commitment to supporting the economic recovery process and allows us to foresee greater reductions as the Issuer continues to implement cuts to the reference interest rate during the remainder of the year.”
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Financial sector vs Bank of the Republic
In detail, and according to the records of the Bank of the Republic, the interest on consumer loans (credit cards, free investment, vehicle purchases, drafts or small loans) between 1 and 30 days were 45.09 percent in May 2023, when the Issuer rate reached its maximum of 13.25 percent.
But by December of that year The financial sector was already charging interest of 31.52 percent for these loans, That is to say, they had decreased 1,357 basis points when the Issuer began to adjust its rate downwards.
Interest rates continued to fall and in the first week of June were at 26.29 percent. Meanwhile, Interest on loans between one and three years was at 25.98 percent, when in May of last year they were 33.29 percent.
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It would be desirable for it to fall further, clearly without neglecting the management of inflation control
It has also been seen a reduction in the interest charged by banks for making advances with credit cards. For example, in May 2023 they charged 44.10 percent, but by December the interest was already 37.15 percent.
In seven months, and by the time the Bank of the Republic began to adjust its rate, the interest on advances had already decreased by 695 percentage points. By the first week of June, this reduction was 1,354 percentage points.
Meanwhile, for the Purchases made in December with the credit card For payments between two and six months, the interest rate was 36.31 percent, which, compared to the 30.18 percent charged at the beginning of June, has seen a decrease of 613 basis points, while the issuer’s rate in this same period has dropped 125 basis points.
Although the president of Fenalco, Jaime Alberto Cabal, recognizes that the usury rate, which is the reference for the collection of interest on purchases and/or advances with credit cards, has dropped considerably, he assures that “It would be desirable for it to fall further, clearly without neglecting the management of inflation control.”
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How much have home buying interest rates dropped?
As for the credits in pesos to buy social interest housing (VIS), Interest rates fell 129 basis points between May and December 2023, but by the first week of June a reduction of 218 basis points had already accumulated.
In May of last year The interest rates on loans in pesos to buy non-VIS housing were higher, They were at 17.99 percent and until the first week of June they had already dropped 337 basis points.
For Camacol, in addition to the changes to Mi Casa Ya, High interest rates have contributed to the failure of home sales to recover. In the first five months of the year, VIS sales have already accumulated a fall of 20.1 percent, and Non-VIS sales have decreased by 16.7 percent.
According to union projections, Mortgage rates should be between 11 and 11.5 percent over the next two years to facilitate access to housing for many households.
