The average interest rates of the 90-day CDTs (DTFs) closely track the behavior of Banco de la República’s benchmark rate, indicating a direct and stable relationship between the two over the period analyzed. However, the interest rate on home purchase loans (mortgage rate) has followed a different path: during 2023 and 2024, this rate mirrored the benchmark rate’s downward trend, but as of year-end 2024, even as the benchmark rate continued to fall, the mortgage rate stabilized and began to rise when it was surpassed by the ten-year government yield, following closely behind.
What is the key economic implication of the relationship between the mortgage rate and the government bond rate?
In the most recent interval, the mortgage rate has been more responsive to the government bond rate than to the benchmark rate. Given the recent deterioration in the fiscal situation, the most significant implication of this association is not only that servicing government bonds becomes more expensive, but also that the cost of mortgage loans and financing for long-term investment projects rises.
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In recent discussions about Colombia’s macroeconomic environment, the weakening relationship between Banco de la República’s (Banrep) monetary policy rate (MPR, or the benchmark policy rate) and market interest rates has received comparatively little attention...
