Banks raise interest rates on home ownership after Lula’s re-election and the market fears a rise in public spending

Bradesco, Itaú and Santander banks readjusted real estate financing interest rates in the last week of October, according to Revista Oeste. The movement made credit more expensive for those looking to buy a property and occurred in a scenario of market reaction to Lula's re-election in the second round.

According to the same publication, the rise in future interest rates also followed the election result. The movement began on Monday, the 26th, the first trading session after the second round. Future interest rates are the reference that the market uses to price rate expectations over time, so their rise indicates that investors have started to demand more premium to carry risk.

What worries the market most, according to the report, is the control of public spending and the increase in expenses. Investors fear that the government will maintain spending growth without measures capable of stabilizing public debt, a scenario that tends to put upward pressure on interest rates.

For liberal economics and center-right readers, the central point is known: when spending advances without a fiscal anchor, the bill usually appears later, in the form of higher interest rates, greater debt and more expensive credit. Real estate financing illustrates this cost directly, because the family that finances their own home pays the difference in their own budget.

The adjustments affect three banks, which suggests that the movement was not restricted to a single institution. The report does not include the percentages applied or the average rate for each bank, so the exact size of the increase for the borrower does not appear in the source consulted.

What changes for the investor

Rising future interest rates weigh on the prices of fixed-rate securities and shares of companies that depend on cheap capital to grow, such as many of those listed on the Nasdaq. The interest curve serves as a reference for other assets, and a change in expectations about public accounts could also affect the dollar and the Brazilian stock market. Those who follow the topic tend to observe concrete signs of expense control and debt stabilization, precisely what the market says it is demanding.

Automatically translated from Portuguese.