State-run Banco do Brasil SA has launched inflation-linked mortgage loans that are tied to the IPCA consumer price index, according to a press release from the bank.

Reports from last week had anticipated the move by the bank, with a source cited by Reuters saying that the loans were part of the bank's initiatives to benefit from low price increases in the country. The credit lines follow a similar program from Caixa Econômica Federal launched back in August for credit that carries interest rate spreads between 2.95 percentage points and 4.95 points above the IPCA.

The loans from Banco do Brasil will carry a maximum term of 180 months, and their interest rates will start at the benchmark IPCA rate plus 3.45%, with the rate to vary according to terms of the transactions and clients' relationships with Banco do Brasil. The credit line will cover up to 70% of the value of residential properties.

For the loans granted under the Sistema Financeiro de Habitação, a federal housing program, the bank's new loans will be for properties worth up to 1.5 million Brazilian reais. For loans granted under the Carteira Hipotecária system, where funds come from investments and savings, they will be for properties worth over 1.5 million reais.

As of Dec. 9, US$1 was equivalent to 4.14 Brazilian reais.