Credit interest rates are the highest since 2018 in the Brazilian market

The average interest rate charged with free resources -those negotiated in the Brazilian market- reached 40.6% per year in August.

It is the highest level since April 2018, according to BC (Central Bank) data.

The percentages charged to individuals reached 53.9% annually, while companies pay 22.81% annually.

The rise in interest rates is linked to the consecutive readjustments of the basic rate, the Selic, which reached 13.75% per year.

The average interest rates of directed credit – which are operations subsidized by the public administration or the state (such as BNDES) for the rural and real estate sectors – exceeded 10% in March 2022.

This happened te last time in October 2017.

The rates are 9.14% for companies and 10.64% for individuals.

When considering operations with free and directed resources, the average rate in Brazil was 28.7% per year. It rose 7.6 percentage points in 12 months.

The rate is higher for individuals (34.4%) and lower for companies (18.9%).

DEFAULT AND DEBT

Default on operations rose to 2.83% of the credit portfolio in August.

This is the highest percentage since June 2020, in the first months of the covid-19 pandemic. For individuals, it reached 3.72%, the highest level since May 2020.

CREDIT MARKET

Even with the rise in interest rates, the stock of credit in Brazil remains strong.

It rose 8.4% from January to August. The Central Bank estimates a growth of 14.2% in the balance of loans in Brazil in 2022.

The basic rate – the beacon of interest in the country – will remain at 13.75% per year for a prolonged period.

The market is working with the first fall of the Selic in June 2023. Until then, the monetary policy will put even more pressure on new loan contracts and put downward pressure on inflation.

The high-interest rate until 2023 also strangles commerce, especially for the poorest, which reduces the consumption of durable goods.

This pulls the economy down in a sector vital for job creation.

What worries most is default, which reached 5.62% in August for individuals (in the case of operations with free resources).

It equaled the highest level since May 2020, when the unemployment rate was 12.9%.

Currently, the percentage of unemployed people is 8.9%.