Brazil's government has announced a major reform of its real estate financing system, set to take full effect in January 2027. The new model will eliminate the long-standing requirement for banks to hold a portion of savings deposits as mandatory reserves with the central bank, a move designed to modernize housing credit in Latin America's largest economy.
The changes come in response to significant and sustained withdrawals from traditional savings accounts, which have been a primary source of funding for the housing market. According to official data, Brazilians withdrew 78.5 billion reais ($14.51 billion) more than they deposited into these accounts between January and September.
Key Takeaways
- Brazil will phase out its mandatory savings reserve requirement for real estate lending by January 2027.
- The reform is a response to massive outflows from traditional savings accounts, which totaled 78.5 billion reais this year.
- A transition period will see reserve requirements gradually reduced while the 65% allocation of savings to housing loans remains.
- The new system aims to give banks more flexibility and integrate market-based funding for real estate credit.
Understanding the Current System
For decades, Brazil's housing market has been heavily dependent on funds from a specific type of savings account known as caderneta de poupança. Under current regulations, banks are required to direct a substantial portion of these deposits toward real estate loans.
Specifically, 65% of all funds held in these savings accounts must be allocated to housing loans. This rule was created to ensure a stable and low-cost source of capital for the real estate sector, making homeownership more accessible.
The Role of Central Bank Reserves
Of the remaining 35% of savings deposits, a significant portion is not freely available to banks. The central bank mandates that 20% of these funds be held as compulsory reserves, or compulsory deposits. This leaves banks with only 15% of the remainder for discretionary lending or investment.
These reserve requirements are a tool of monetary policy, used by the central bank to control liquidity in the financial system and manage inflation. However, they also limit the funds available for banks to use in other profitable ventures.
Why Savings Accounts Are Losing Appeal
Traditional savings accounts in Brazil, while tax-exempt, have offered low returns for years. This has become particularly problematic in the current high-interest-rate environment. With the benchmark Selic interest rate at 15%, its highest level in nearly two decades, investors have found far more attractive returns in other fixed-income products. Increased financial literacy and the rise of digital investment platforms have made it easier for Brazilians to move their money out of low-yield savings and into higher-performing assets.
The Phased Transition to a New Model
The government has outlined a gradual transition to avoid disrupting the housing market. The changes will be implemented in stages leading up to the full rollout in January 2027.
Until 2027, the core rule requiring banks to allocate 65% of savings deposits to housing loans will remain in place. This ensures that the primary funding source for the sector is not abruptly cut off.
Reducing Reserve Requirements
The first major change during the transition period will be a reduction in the compulsory reserve requirement. The central bank will lower the reserve mandate from 20% to 15%.
This move will immediately free up capital for banks. The 5% of funds that were previously locked away at the central bank will now be directed toward the government's new real estate funding framework, allowing financial institutions to begin adapting to the new system.
By the Numbers: Brazil's Economic Climate
- 78.5 billion reais ($14.51 billion): Net outflow from savings accounts from January to September.
- 15%: Brazil's benchmark Selic interest rate, a nearly two-decade high.
- 65%: The percentage of savings deposits currently earmarked for housing loans.
- 12%: The maximum annual interest rate for housing loans under the Housing Finance System rules.
How the New Funding Framework Will Work
The new model scheduled for 2027 is designed to link real estate funding more closely with the broader capital markets, reducing its reliance on traditional savings accounts. It introduces a system that rewards banks for raising funds independently.
Under this framework, when a bank secures funding from the market—for example, by issuing real estate credit bills—and allocates it entirely to property loans, it gains a significant advantage. The bank will be permitted to use an equivalent amount of funds from its low-cost savings account deposits for any purpose it chooses, a practice known as free allocation.
The rule changes follow years of government debate amid heavy outflows from Brazil's traditional savings accounts, which are tax-exempt but offer low returns.
Maintaining Consumer Protections
While the new system offers banks more flexibility, the government has included safeguards to protect consumers. A critical condition is that 80% of the housing loans originated under this new model must adhere to the rules of the Housing Finance System (SFH).
The SFH imposes important limitations, most notably capping interest rates at 12% per year. This ensures that a majority of the newly structured loans remain relatively affordable for homebuyers, preventing a sharp increase in borrowing costs as the market transitions.
Implications for Brazil's Economy and Housing Market
This structural reform is expected to have wide-ranging effects on Brazil's financial sector and the broader economy. By modernizing real estate finance, the government aims to create a more resilient and dynamic housing market.
For banks, the changes offer greater operational freedom and the potential for increased profitability. By reducing mandatory reserves and allowing free allocation of funds, financial institutions can optimize their balance sheets and respond more effectively to market conditions.
For the real estate market, the new model could lead to a more diversified and stable source of funding in the long term. While the reliance on savings accounts has worked in the past, the recent outflows have exposed its vulnerabilities. Integrating market-based instruments is intended to provide a more sustainable capital base for future growth in the housing sector.
