“Opportunities to improve housing conditions”: Putin proposed launching a program of preferential mortgages at 6.5% per annum

Russian President Vladimir Putin has proposed launching a program of preferential mortgages at 6.5% per annum for the purchase of housing-comfort class. With this initiative, the head of state spoke at a meeting to support the construction industry.

“I propose launching a special preferential mortgage program, supporting both our citizens and the construction industry, giving people additional opportunities with the help of the state to improve their living conditions. Under such a program, it will be possible to take a mortgage at a rate of 6.5% per annum for the purchase of new comfort class housing at a price of up to 3 million rubles in the regions and up to 8 million in Moscow and St. Petersburg, ”Putin said.

According to him, it is planned to allocate about 6 billion rubles from the budget for the program of preferential mortgages. 

“I draw your attention - the reduced preferential rate will be valid for the entire loan term. You can apply for such a mortgage until November 1, 2020. I ask the government to ensure the early launch of such a program, ”the president added. 

The proposed initiative will increase the demand for mortgages in Russia. About this in an interview with RT told the deputy head of the information and analytical center "Alpari" Natalia Milchakova. However, according to her, many additional lending conditions at a reduced interest rate will depend on the banks themselves.

“Until now, the preferential interest rate on mortgages has only concerned young families with children and large families. In this case, the president did not say that restrictions are imposed on some groups of borrowers, but the banks themselves will probably set such restrictions, ”Milchakova explained.

According to RT, the head of the analytical department of AMarkets, Artyom Deev, the possible restrictions on obtaining preferential mortgages are likely to be related to the income level of the borrower. 

“The initiative is good for those who have long planned to expand housing, in whose families a child was born or should be born. However, in current conditions, not all families will be able to take advantage of the offer. So, people who have lost their jobs will not be able to provide documents confirming the level of income to the bank. However, if the family still has funds for a down payment, then it is possible to improve housing conditions and stop paying rent in someone else’s apartment, ”said Deev.

Recall that earlier Vladimir Putin signed the law on granting credit holidays to citizens who find themselves in a difficult situation in connection with the spread of coronavirus. We are talking about both consumer and mortgage loans. 

According to the law, borrowers will be able to apply to the bank for credit vacations for up to six months if their income for the previous month decreased compared to the average monthly income for the previous year by at least 30%. 

The maximum size of a mortgage loan for holidays will vary by region. So, for the residents of Moscow, the corresponding amount will be 4.5 million rubles, for the Moscow region, St. Petersburg and the regions that are part of the Far Eastern Federal District - 3 million rubles, and for the rest of the Russian Federation - 2 million.

Business Assistance

Authorities also announced new business support measures. Thus, the Russian government will expand the program for issuing interest-free loans to companies to pay salaries to employees. This was announced on April 16 at a cabinet meeting by Prime Minister Mikhail Mishustin.

“At present, five banks are already participating in the program, another 25 will enter in the near future. Pending applications by banks for more than 3.5 billion rubles. But this is not enough. The program is designed for 150 billion rubles. Once again, I ask banks and heads of financial organizations to pay attention to this measure and to join this program as soon as possible, ”Mishustin said.

The head of government recalled that 75% of such salary loans will be secured by guarantees of the VEB.RF state corporation. As Vladimir Putin previously noted, the corresponding decision will allow “to reduce risks for commercial banks, which means to increase the availability of credit resources”.

According to experts, as a result, financial institutions will begin to actively issue interest-free loans to enterprises in the affected sectors of the economy. Recall that the corresponding list includes public catering, services, the hotel business, automobile and air transportation, cultural and sports sectors, as well as non-food retail.

“Earlier, we observed trends in which banks were reluctant to lend to affected enterprises, not wanting to take the corresponding risks. The entry of VEB.RF into this process in the form of a guarantor may encourage banks to more actively issue these soft loans, ”said Anton Pokatovich, chief analyst of BCS Premier, in an interview with RT.

Under the program, banks must provide business loans for a period of 12 months. The first six months, interest is not charged, after which the rate rises to 4% per annum. To implement the program, the Central Bank will provide banks with 150 billion rubles. As expected, the funds should be enough to cover the six-month minimum wage (minimum wage) of 1.5 million employees. At the same time, according to Anton Pokatovich, if necessary, funding for the initiative of the authorities can be increased to 300-500 billion.

In addition to interest-free loans, starting in May, the companies most affected by the pandemic will begin to receive free financial assistance from the state for payments to their employees. The amount of subsidies will be equal to one minimum wage and amount to 12,130 rubles per employee. At the same time, companies will be able to receive funds from the state only if they maintain at least 90% of the state as of April 1.

The state will provide grants to affected businesses. This was at a meeting of the Cabinet said the head of the Ministry of Economic Development Maxim Reshetnikov.

“This type of support does not bind the company with obligations for the specific use of funds, and business can spend the money received from the state on what it considers necessary. This may be a salary, utility bills or other obligatory payments, ”Reshetnikov emphasized.

According to the minister, direct payments to business from the state will cover more than half of the wage fund in April-May. In general, the total size of the anti-crisis program exceeds 2 trillion rubles.

According to experts, the government’s measures will mitigate the financial burden on enterprises, avoid a large number of company bankruptcies and rising unemployment, as well as support consumer demand.

“Now the authorities must support the aggregate demand in the economy, so the preservation of staff and salaries of employees is a priority for the country's leadership. The income of many companies was under pressure, which is why employers are forced to reduce costs due to layoffs, as well as reduce or “freeze” wages. The approved measures will allow companies to maintain wage funds without critical reductions and, accordingly, maintain the income level of their employees, ”concluded Anton Pokatovich.