“Space for maneuver”: the average mortgage rate in Russia dropped to a historic low

In May 2020, the average mortgage rate in Russia decreased from 8.32% to 7.4% per annum. The value became the lowest for all time of observations. On Tuesday, June 23, said the chairman of the Central Bank Elvira Nabiullina.

“Mortgage rates are falling, and our preliminary data indicate this. We have not voiced this figure yet, but by May the mortgage rate is already 7.4%. And about a third of the loans were issued just at a reduced rate of 6.5%, ”Nabiullina said during a speech in the State Duma.

Recall that in April the government approved a program of preferential mortgages at a rate of 6.5% per annum, which can be used until November 1, 2020. Initially, mortgages with a corresponding rate of up to 3 million rubles were presented to the Russians, and up to 8 million rubles in Moscow, Moscow Region, St. Petersburg and the Leningrad Region. Meanwhile, June 23, Vladimir Putin announced the expansion of this program.

“I propose to extend the preferential mortgage to new housing worth not up to three, as before, but up to six million rubles, and in the largest agglomerations - Moscow, St. Petersburg - up to 12 million rubles,” the president said in an address to citizens.

The reduced rate allows Russians to save on interest on the loan, which makes the purchase of real estate more profitable. This was told by RT expert on real estate market at the Academy of Finance and Investment Management Alexei Krichevsky.

“In this situation, a decrease in the rate gives a certain room for maneuver to the debtors and reduces the debt burden of the population,” the expert noted.

In May 2020, the volume of mortgage loans issued in Russia immediately increased by 8% compared to the same period in 2019 and reached 205 billion rubles. The indicator returned to growth after a sharp collapse in April (by more than 15%). This is stated in a joint report by DOM.RF and Frank RG.

In addition to the program of preferential mortgages, the increased interest of Russians in housing lending is associated with the gradual weakening of restrictive measures related to the spread of coronavirus. This point of view in a conversation with RT was expressed by the vice president of the Russian Guild of Realtors Oleg Samoilov. According to him, in conditions of self-isolation, some customers decided to postpone the purchase, because they did not know how long the non-working days would last. Moreover, at the moment, sales are gradually returning to the pre-crisis level.

“For two months of self-isolation pent-up demand has accumulated. Some people who were going to take a mortgage immediately before the introduction of quarantine measures postponed the purchase of real estate in order to determine the situation. If the easing of measures continues, along with government stimulus and a decrease in the key interest rate of the Central Bank, the pent-up demand will be realized, and the real estate market will quickly recover, ”said Samoilov.

In many respects, the situation in the industry will depend on the actions of the Central Bank. 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 lending rates, including mortgage ones.

In June, the Central Bank lowered its key rate to a minimum for the entire post-Soviet period (up to 4.5% per annum) and may continue to reduce the indicator in the near future. According to RT economist Anton Pokatovich, when making decisions, the regulator will rely on the level of inflation in the country.

“In the summer months, consumer price growth in Russia will remain below the target price mark of 4%. Therefore, in order to accelerate inflation to the desired level, the regulator can make credit products even more affordable. I don’t exclude that at the end of 2020 the key rate can be reduced to 3.5-4% per annum, ”Anton Pokatovich believes.

The actions of the Bank of Russia should lead to an additional reduction in the cost of mortgages. This point of view in an interview with RT was expressed by the vice president of the International Academy of Mortgage and Real Estate Irina Radchenko.

“Given the expansion of the program of preferential mortgages and the possible reduction in the key interest rate of the Central Bank to 4% per annum, the average mortgage rate may decrease to 6% per annum by the end of the year,” Radchenko noted.

At the same time, experts do not expect real estate appreciation in the near future. According to Alexei Krichevsky, in the summer, amid growing interest in mortgages, market prices may show insignificant growth, but in the fall, the cost per square meter may decrease by an average of 5-8%.