June 20, 2017 / 11:30 AM / a year ago

Brazil's Caixa freezes cheap mortgage line as funds dry up

SAO PAULO, June 20 (Reuters) - Brazil’s state-run bank Caixa Econômica Federal, the country’s largest mortgage lender, suspended new low-rate housing loans due to lack of funds, the lender said in a statement late on Monday.

The so-called Pró-Cotista line is the cheapest housing financing available in Brazil with interest rates of 8.6 percent per year, compared with a central bank benchmark rate of 10.25 percent.

Caixa had already suspended Pró-Cotista loans in May, but resumed loans shortly after the government injected it an extra 2.54 billion reais ($773.94 million) that were originally earmarked for the state housing program Minha Casa Minha Vida.

Caixa funds the Pró-Cotista line with resources from a mandatory workers’ severance fund known as FGTS.

The severance fund has seen heavy withdrawals this year under a government program that allows workers to extract money from those accounts, part of efforts to boost consumer demand and pull Latin America’s largest economy out of its worst recession on record.

$1 = 3.2819 reais Reporting by Aluísio Alves; Writing by Silvio Cascione; Editing by Bernadette Baum

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