Through her Twitter account, President Dilma Rouseff announced the approval of an increase in the amount of money that employees can use from the funds accumulated in their FGTS accounts toward the purchase of a new home. Rouseff stated that the increase “offers more possibilities for those who dream of their own home.”
The decision by Brazil’s National Monetary Council came after a long debate. The homebuilding industry, which has struggled to remain profitable, has been pushing for the increase repeatedly over the past few years. Their expectation is that more homebuyers will have a greater ability to purchase homes thanks to the very low interest rates applied to FGTS funds.
The increase was also requested by non-government banks. Their goal is to stimulate the mortgage sector. The previous increase was in 2009 when the limit was raised to R$500,000 from R$350,000.
Those seeking to purchase a home in Rio, São Paulo, Minas Gerais, and Brasília can now apply R$750,000 of their FGTS to purchase a home. The previous limit was R$500,000. For homeowners seeking to purchase homes in other states, their limit was raised to R$650,000. The increased limit also applies to foreigners working in Brazil.
The increased limit is welcomed by Brazil’s middle class. That’s because they tend to purchase homes that cost more than the previous $500,000 limit, leaving them unable to apply their FGTS funds toward a purchase.
The National Monetary Council is comprised of high-ranking officials of the Central Bank, the Finance Ministry, and the Budget and Planning Ministry. According to reports, their decision to raise the FGTS limit was based on high inflation, the steep increase in real estate prices, and increasing construction costs. Their concerns were particularly focused on economic conditions in Rio and São Paulo.
FGTS, or “Fundo de Garantia do Tempo de Serviço,” is a government-led unemployment insurance fund. Created in 1966, its purpose is to provide unemployment insurance for workers. Under the program, employers pay 8% of their employee’s salary into the fund each month.
The employee’s account can only be accessed under special conditions. They can use the money if they lose their job, suffer a serious illness, decide to retire, or choose to purchase a primary home. Use of FGTS funds is not unlimited, however. The fund can be used only to purchase a home in the area surrounding the employee’s job or current place of residency. Additionally, the fund can only be spent on the employee’s first home.
