A caress to the middle class

The new mortgage lending model launched by Lula and aimed at the middle class, with an increase in the maximum loan amount to 2.25 million and interest rates of up to 12% per year, is a milestone in the evolution of the housing finance system. It represents a step forward in the use of financial institutions' own mechanisms to address both the economic downturn and the opposition's attempts to politically hamper Brasília's initiatives, data and analyses reveal.
The new rules include changes to the mandatory allocation model for savings deposits and changes to the regulations governing compulsory deposits on these same deposits. According to the National Monetary Council and the Central Bank, the system provides R$111 billion in resources in the first year and makes R$52.4 billion more available for housing finance than the previous configuration, of which R$36.9 billion is available immediately.
The new model "is more than just freeing banks' reserve requirements," according to Finance Minister Fernando Haddad, and is not a "palliative solution, but a structural change," according to Central Bank President Gabriel Galípolo. Vice President Geraldo Alckmin expects 3 million housing contracts to be signed by the end of the year.
Ely Werthein, CEO of Secovi, the real estate companies' union, believes the new credit model "will work very well." His calculation, in line with that of the Central Bank, predicts that in the first year of operation, starting in January, approximately R$40 billion will be available for the middle class to access housing financing under better conditions. Over five years, approximately R$190 billion in additional resources will be available. The measure provides breathing room for the savings and loan system for the next 20 to 25 years, according to Werthein.
The measure gives breathing space to the savings and loan system for the next 20 to 25 years.
"The Central Bank has rightly identified significant room for expansion. Our mortgage market is less than a third of the Chilean market and almost half of the South African market, as a proportion of GDP," notes economist André Luiz Passos Santos, managing partner of BPCT Consultoria Econômica.
The new model is even more significant amid the adverse conditions faced by the current government, compared to the first Lula administration, Santos emphasizes. The worsening situation includes the rise in credit costs, with the replacement of the TJLP (Long-Term Interest Rate) with rates close to market interest rates, privatizations, a predatory dividend distribution policy for state-owned companies, and "draconian fiscal constraints," which have led to one of the lowest gross capital formation rates in history. "Much of the state's capacity for economic intervention was weakened or destroyed during this period," adds the economist.
Between 2015 and 2022, unemployment rose and workers' income shrank. The minimum wage stopped receiving real increases, and the income tax rate was frozen, reducing disposable income and, consequently, consumption and demand for credit for investment.
For Guilherme Mello, Secretary of Economic Policy at the Ministry of Finance, the new real estate credit model "is a fundamental step toward completing the housing finance policy" and is also part of what he calls the "credit ladder," built by the current administration and consisting of: 1) the Desenrola Program for individuals, small businesses, and small rural producers to renegotiate their debts; 2) guided productive microcredit from Acredita no Primeiro Passo, for those registered with CadÚnico and already have, or want to start, a small business—a very significant initiative in the North and Northeast, with interest rates close to 10% per year; 3) ProCred 360, for individual microentrepreneurs and microenterprises, the result of a partnership between the federal government and banking institutions, which encourages credit for firms with annual revenues of up to R$360,000, with an interest rate of the Selic rate plus 5%; 4) Pronamp, an incentive program for small and medium-sized businesses, with interest rates of the Selic rate plus 6%, guaranteed by the Operations Guarantee Fund, similar to ProCred. This safeguard allows us to offer credit at a lower rate to entrepreneurs.
Scenario. Withdrawals from the FGTS (Unemployment Fund) have depleted an important source of funds. Contrary to the market, the IMF positively assesses the current credit policy – Image: Cory Hancock/IMF and Renato Luiz Ferreira
The set also includes: 5) the FGI Peac, operated by BNDES and covering small, medium, and large companies, with very good acceptance; 6) the Climate Fund, for larger projects linked to ecological transformation, also with interest rates below market rates; 7) the Harvest Plan, for the rural sector, with very attractive interest rates, especially for family farming to produce food, reaching 3% per year; and 8) Resources from Finep and FAT, from BNDES, for innovation and technology, with a reference rate (TR) cost, that is, 1% to 2% per year, plus bank margins, for credit operations, which have also worked well.
These programs, according to Mello, allowed credit to expand by more than 10% last year. This year, he estimates growth will be "a little less than 10%, but without a drop in the rate of lending."
Regarding housing credit, the underlying problem, according to Santos, is that the Brazilian Savings and Loan System, designed in the 1960s and 1970s, obtains funding from two low-yield financial instruments, the savings account and the FGTS, in order to allow for low interest rates and long financing terms.
Both, however, have been severely weakened in recent years. Savings accounts have long been losing funds, and the FGTS (Fund for Severance Indemnity Fund) has been practically "depleted" since the Temer administration by permissions for withdrawals beyond those originally intended, such as the indiscriminate release of inactive account balances, anniversary withdrawals, and other measures to offset the population's loss of income. Similarly, the law requiring the FGTS to distribute half of its investment profits proportionally to its shareholders has contributed to limiting the fund's investment capacity.
These measures, while positive from the perspective of savers and workers, "seriously undermined the sources of funding that allowed for cheaper housing credit." The resumption of the Minha Casa, Minha Vida program mitigated part of the problem, but excluded families with incomes exceeding R$12,000 per month.
The new program reopens the financing market for the middle class using a mechanism considered "simple and intelligent," Santos emphasizes. Currently, banks are required to invest 65% of the funds raised in savings accounts in housing loans, and to make compulsory deposits with the Central Bank of 20% of the savings balance. The measure gradually frees up the percentage of these deposits for use in housing loans, allowing more of the compulsory deposit to be freely used by banks, seeking more profitable operations to offset the more modest return on mortgage loans, capped at 12% per year. This creates an incentive for banks to expand their operations in mortgage loans, which have historically been heavily concentrated in Caixa Econômica Federal.
The country's real estate credit market is less than a third of that of Chile and almost half of that of South Africa, as a proportion of GDP.
Government initiatives have contributed to "strong credit growth in Brazil despite high interest rates," the International Monetary Fund found in a recent study. Contrary to what the paradox of high interest rates versus credit growth suggests, "concerns about the ineffectiveness of monetary policy are proving largely unjustified, and monetary policy transmission in Brazil remains active," the IMF acknowledges. The analysis challenges the market's interpretation, used to pressure the government to cut spending, that the 15% Selic rate is not producing the expected effect, a topic of study by economists at Banco Inter that is widely disseminated among financial institutions. Economists André Valério and Gustavo Menezes identify "a loss of monetary policy effectiveness, which is related to fiscal policy and a lack of confidence in meeting the inflation target."
Among the factors driving credit growth in recent years, IMF economists point to "faster-than-expected economic growth, with low unemployment and rising incomes" and "significant structural changes that have increased financial inclusion and credit availability." Another important factor was the growth of digital banks and other fintechs, which in 2024 represented 25% of the credit card market and more than 10% of non-consigned personal loans. Tax-exempt debentures tripled the share of corporate financing in the bond market.
By turning to credit to keep the economy afloat amid growing attacks from the market and the opposition, Lula is using an instrument with which he is well acquainted. During the 2008 global crisis, he ordered an increase in credit granted by Caixa Econômica Federal, BB, and BNDES, and Brazil was one of the countries that emerged from the recession quickest.
Published in issue no. 1384 of CartaCapital , on October 22, 2025.
This text appears in the print edition of CartaCapital under the title 'Affection to the middle class'
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