Mexican Banorte pulls plug on 20, 30-year mortgages

Banorte, Mexico's fifth largest bank, has stopped offering 20- and 30-year mortgages because of increased market uncertainty caused by the world credit crisis. Mexican banks have escaped much of the fallout from the international financial turmoil but increased risk aversion and a recent rise in defaults has led many to scale back lending growth. "As a bank that receives short-term deposits and lends long term, we need hedging instruments," Banorte (GFNORTEO.MX) chief executive Alejandro Valenzuela said in an interview transcript sent to Reuters on Monday by the bank. "Today, there is no market for those (instruments) with reasonable prices. When it normalizes, we'll begin offering again," Valenzuela said. Yields on the Mexico's 30-year bond , which the government began placing two years ago to give banks and investors a reference for long-term lending costs, surged in the second half of last year as investors shocked by the world financial crisis hauled money out of emerging markets. Since then the 30-year yield has tumbled to 7.70 percent. Mexico's banks are considered well-capitalized. They have not sought to lend to subprime borrowers and have avoided many of the problems plaguing financial groups in the United States and Europe. Still, nonperforming consumer loans have risen sharply in recent months and are expected to climb more as the economy grinds to a halt this year and many Mexicans lose their jobs. Mexico's banking system is dominated by international giants including Citigroup (C.N), BBVA (BBVA.MC), Santander (SAN.MC) and HSBC along with locally-controlled Banorte.