Dashing near-zero – Newspaper Kommersant No. 26 (7471) of 02/11/2023

The Bank of Russia strictly instructed bankers not to use marketing schemes when issuing mortgage loans, which, according to the regulator, while externally attractive, ultimately lead to the sale of real estate to customers at inflated prices. So far, such cases are isolated, but if banks switch to the mass use of such schemes, the Central Bank threatens to tighten the requirements for supervised organizations at the legislative level.

The Bank of Russia paid special attention to the spread of mortgage programs, which are, in fact, the reincarnation of mortgages at near-zero rates, which the Central Bank is actively fighting (see. “Kommersant” dated November 17, 2022). In particular, we are talking about a new cashback mortgage scheme, which was previously presented by the developer PIK and Tinkoff Bank (see below). “Kommersant” dated January 27).

“We are very concerned that such schemes are multiplying. One scheme is closed, another appears,” said the head of the Bank of Russia Elvira Nabiullina at a press conference following the meeting of the board of directors, without naming, however, specific companies and banks.

So far, such cases are isolated, but ultimately these schemes “carry risks for the borrower,” she said. At the same time, according to Ms. Nabiullina, the Central Bank is ready to take regulatory measures, as was the case with subsidized mortgages from developers.

In the fall of 2022, Ms. Nabiullina called mortgages at zero rates a “marketing ploy”, which often hides a scheme for selling apartments at an inflated cost. Most of these transactions were built on the basis of a preferential program with state support (the maximum rate for it is now 8% per annum). Banks in such schemes received a commission from the developer.

After criticism from above, market participants quickly came up with new schemes, in particular, “mortgage for 1 ruble”. Large banks, including Sberbank, were seen in such programs. One of the latest schemes is a mortgage with cashback for the first installment. However, the value of real estate with such a promotion is 10-15% higher than without participation in it. According to market participants, the volume of transactions subsidized by the developer may account for more than half of sales in the primary market.

It is assumed that banks will begin to create increased reserves for mortgages with extremely low rates, and this should apply to loans issued from January 1, 2023.

The corresponding draft was published on the website of the Central Bank at the end of last year. After that, a number of banks began to raise the level of rates under these programs from 0.01% per annum to at least 3% per annum.

But if the regulatory measures do not help and “these schemes will multiply”, the Central Bank will insist on amendments to the legislation, providing that “the funds of the population through projects with equity participation should be only according to the standard schemes described in the legislation, without deviations,” Ms. Nabiullina.

Sberbank told Kommersant that they “support the efforts of the Central Bank to stabilize the real estate market.” “Back in January, the bank stopped issuing loans subsidized by the developer at a rate below 3% per annum. The bank now does not have mortgage programs with cashback from the developer, which are of concern to the Central Bank, ”they emphasize.

However, another interlocutor of Kommersant in one of the banks fears a general decline in the issuance of mortgage loans. He notes that now the number of non-standard mortgage programs has been significantly reduced. “It will be more difficult for banks to maintain lending volumes when real estate prices rise and purchasing power decreases,” he explains.

Rusipoteka’s chief expert Sergey Gordeiko also believes that squeezing out such mortgage programs will lead to a reduction in the number of transactions.

Subsidized mortgages increased housing affordability, he said. At the same time, according to him, the negative effect for the client due to the increase in the value of real estate was not so significant, except for cases when real estate was acquired in such a transaction for investment purposes. Currently, the solvency of customers is declining, but at the same time, if developers start to reduce prices for apartments, they may have problems with servicing loans, the expert explains.

Olga Sherunkova