Vladimir Putin instructed the Central Bank to prepare proposals by May 1 to increase the availability of mortgages for the population. The corresponding decree of the president is published on the Kremlin website.
“To recommend the Bank of Russia to analyze, together with the joint-stock company DOM.RF, the expenses of borrowers on mortgage housing loans that are not included in the interest rate of the loan, and take measures to reduce the full cost of such loans,” the statement said.
According to experts, at the moment, the Central Bank has already begun to remove barriers to issuing housing loans to Russians. In particular, the regulator abandoned the idea of taking into account the debt burden indicator when issuing mortgage loans with an initial payment of up to 20%.
Moreover, to reduce the cost of mortgages, the Bank of Russia may further reduce the amount of non-interest payments in mortgages. This was in an interview with RT the chief analyst of BCS Premier Anton Pokatovich.
“We are talking, for example, about reducing the size of insurance payments within the framework of mortgage lending, reducing commissions arising from the execution of a mortgage transaction, for example, when using a bank letter of credit, as well as payments for real estate appraisal,” the expert explained.
As a measure to support the Russian mortgage market, the Central Bank also decided to abolish premiums on risk ratios for housing loans issued before April 1, 2020. This was announced on Friday, April 3, during a press conference by Central Bank Chairman Elvira Nabiullina.
“Banks bear the cost of providing mortgage vacations, and the dissolution of the already accumulated buffers, this is about 110 billion rubles, which gives more opportunity to adapt to the situation and continue lending activity. We expect that the banks, taking advantage of this privilege, will direct the received resources precisely to continue lending, and not to bonuses and dividends, ”Nabiullina emphasized.
In addition, the Bank of Russia expects an increase in mortgage refinancing operations after overcoming the coronavirus pandemic.
“This will help to reduce the burden on borrowers associated with servicing debt, and, accordingly, further reduce credit risks for mortgage loans,” the Central Bank said.
Percent fluctuations
According to the program of the national project “Housing and Urban Environment”, the average mortgage rate in Russia should decrease to 8.7% in 2020, then to 8.5% in 2021 and 7.9% in 2024. According to the latest estimates of the Central Bank, by the beginning of March, the value had already dropped to 8.69% per annum and became the lowest for the entire time of observation.
According to experts interviewed by RT, a decrease in mortgage rates primarily depends on the monetary policy of the Central Bank. Traditionally, Russian banks are closely monitoring the change in the key rate of the regulator and, on the basis of decisions taken by the Central Bank, independently determine the level of long-term credit rates, including mortgage ones.
In 2019, the Central Bank lowered its key rate five times - from 7.75 to 6.25%. During the first meeting in 2020, February 7, the regulator again lowered it by 0.25 percentage points - up to 6% per annum.
Meanwhile, in March, following a meeting, the board of directors of the Central Bank left the rate unchanged. This decision was explained by the top management of the regulator with increased inflation risks. According to the Central Bank, consumer price growth accelerated due to the influence of coronavirus on the economy, falling oil prices and the weakening ruble.
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Recall that by reducing the key rate, the Bank of Russia stimulates business activity and economic growth in the country. In the long term, the policy of monetary authorities leads not only to cheaper loans, but also to an increase in domestic demand and investment. Meanwhile, in periods of accelerated inflation, the regulator traditionally stops cutting the rate or increases it to prevent a more significant increase in prices.
It is curious that amid accelerated inflation in March, many banks praised the likelihood of raising the key interest rate of the Central Bank and began to increase interest on housing loans in advance. About this RT said the first vice president of the all-Russian public organization of small and medium-sized enterprises "Support of Russia" Pavel Sigal.
“In March, a number of leading banks, not waiting for decisions of the Central Bank at a key rate, began to increase interest on mortgage loans by an average of 0.5-1.5 percentage points. Despite the fact that many expected an increase in the key interest rate of the Central Bank, this did not happen - the regulator took a break, ”said Segal.
According to Elvira Nabiullina, consumer price growth was short-term, and the level of annual inflation still remains below the Central Bank's target mark of 4%. Against this background, the Bank of Russia still considers it possible to continue lowering the key rate and thereby stimulate consumer demand under quarantine measures.
“The consequences of restrictive measures on aggregate demand, both in terms of external demand and domestic, are likely to be longer-lasting. This will be a significant disinflation factor. With the development of the situation under this scenario and stability in the financial markets, we see some potential for lowering the key rate during 2020, ”the head of the regulator emphasized.
According to RT analysts surveyed, the Bank of Russia may resume cutting its key rate in the second half of 2020. According to Anton Pokatovich, depending on the situation on world markets and the impact of coronavirus on the Russian economy, the Central Bank may reduce the rate to 5-5.5% per annum. It is expected that such actions will positively affect the percentage of housing loans in the country.
“We believe that by the end of the year, mortgage rates will gravitate to levels of 8-8.5%. If this year the Central Bank will lower the key rate, interest on the mortgage may fall below the 8% mark at the end of 2020 - the beginning of 2021, ”Pokatovich concluded.