Banks will be re-discounted affordable mortgages
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Mortgages for new buildings with a down payment of up to 10% will be issued more restrained. The Bank of Russia has set higher capital requirements for such loans, which should reduce the risk appetite of banks. Developers who are facilitating sales with low or no down payment mortgages believe that the Central Bank’s tightening will lead to a significant decrease in sales. Bankers, on the other hand, will practice issuing with a minimum contribution of just above 10%.
CB announced on the introduction of a premium to the risk coefficient for mortgages in the primary real estate market. Now, a higher level of capital is needed to issue the same volume of loans. The requirements will apply to mortgages with a down payment of 10% or less of the value of the home. In the secondary market, a similar restriction is already in effect.
The starting threshold of contribution in the amount of “from 10%” can be found with many major players, such as GPB, FC Otkritie, PSB, Dom.RF, MKB, Ak Bars. At Sberbank, VTB and Alfa-Bank, the minimum contribution in the primary market starts from 15%. There are mortgage programs without a down payment, but only for individual residential projects of developer partners. Sberbank, PSB and SMP-bank have them, the down payment lending program is being implemented by Rosbank. Traditionally, such programs builders in partnership with banks fuel the demand for housing.
However, according to the Central Bank, in the second quarter, banks almost did not provide mortgages for new buildings with a down payment of up to 10%, the share of such loans was 0.3% against 2.6% in the first quarter. According to the Central Bank, in the first quarter there could be about 3.6 thousand such loans, and in the second – only about 170.
However, the Central Bank is concerned that in recent months, “construction companies have begun to actively advertise mortgage programs without a down payment”
Developers are trying to restore sales volumes. In the market of new buildings in the Russian Federation, the number of transactions in the second quarter fell four times compared to the first, to 105.8 thousand contracts, said Anton Glushkov, president of the National Association of Builders (NOSTROY). A target audience has formed for such products, says Metrium’s managing partner Nadezhda Korkka. Vladimir Shchekin, co-owner of the Rodina group, clarifies that back in the spring, many developers launched programs with a reduced rate for one or two years.
In total, since the beginning of 2022, about 15% of clients have applied for a mortgage with a zero or minimal down payment, says Gennady Dikalov, Commercial Director of the MIC Group.
Therefore, developers expect a tangible decrease in the pace of sales with the tightening of regulation. “This is a critical value for the market, since only in July-August we began to notice an increase in the registration of equity participation agreements in the Moscow region after the spring recession,” says Mr. Dikalov.
One of the goals of the regulator in this case is not to increase the debt burden of borrowers, says Sergey Mazurik, an expert on the mortgage market. In this situation, there are not so many options to “write” the client into the required level of PTI (debt limit) acceptable for the bank: reduce the interest rate or increase the loan term, or refuse the loan, the expert explains. At the same time, lowering the rate and increasing the term is unprofitable for the bank.
The Central Bank’s measures “seem to be a certain signal” for banks that may go into a more risky segment, wanting to increase their share in the mortgage market, says Elena Trofimova, director of product development and customer service at Novikombank. Real estate prices have risen substantially over the past two years, “and for fear of further price increases, borrowers may choose to take out a mortgage now with a down payment of less than 10%,” she explains.
From the point of view of risks, the most vulnerable clients with a high debt load go to mortgages with a low or zero installment, Mr. Mazurik points out. In turn, going into arrears for such customers will lead to expenses on reserves. The expert admits that banks that have practiced issuing such a mortgage will begin to raise the minimum level of down payment above 10%.
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