Preferential mortgage adjusted percentage – Newspaper Kommersant No. 234 (7435) of 12/16/2022

The fate of preferential mortgages, hotly discussed at the end of the year, has been resolved. Russian President Vladimir Putin said that the program is being extended until mid-2024 “to fine-tune the market.” For borrowers, the issue price rises from 7% to 8% per annum, how much the budget costs for subsidies at rates will increase, that is, what will be the limits for issuing extended preferential mortgages for banks is still unknown.

Russian President Vladimir Putin December 15 informed on the decision to extend the preferential mortgage program for new buildings until July 1, 2024, with a simultaneous increase in its cost by 1 percentage point to 8%. According to previous plans, it was supposed to be completed at the end of this year. The extension of the terms with a simultaneous increase in the rate is “measures for fine-tuning and stabilization” of the market in the face of a decrease in the number of issues, the president said.

According to Frank RG, in annual terms, in January-November 2022, the volume of mortgage issuance was 19% lower than last year.

The family mortgage program has also been expanded, it will be extended to families in which “at least two children under the age of 18” are now available to families with children born since 2018. Current rates on conventional mortgages are 11-12%.

The banking market expected such a decision on state programs. As a result of the changes announced on Thursday, the issuance of family mortgages will increase by about 30,000 loans per year, and the preferential program at 8% will cover another 300-350 thousand families, Vitaly Mutko, CEO of Dom.RF, estimates the effect.

In anticipation of the decision of the authorities, some players allowed the mortgage market to fall by 25% or more if the state program was curtailed (see “Kommersant” dated November 30). According to a Kommersant source, as part of the modification of the program there were several options. “The first option is to cancel the preferential program for Moscow, the Moscow region, St. Petersburg and the Leningrad region,” he says. “The second is to maintain the preferential program in these four markets, but with a reduction in the loan limit (for other regions – no change). The third is to cancel the current program “at 7%”, but in return to expand the family mortgage at 6% and extend it to families with two children under 18 years old.

As a result, the authorities chose a compromise option. “Together with other banks, we were of the opinion and tried to convey the position that it is necessary to smoothly complete preferential mortgages,” the GPB says. Sberbank notes that “they agree with the smooth modification of the program, without abrupt changes.” Preferential programs are especially relevant in difficult periods for the market, says Ivan Belyaev, director of the retail sales department at Novikombank: “They allow you to avoid a sharp drop in demand for real estate.”

This year, almost every second transaction takes place precisely under state programs, Anatoly Pechatnikov, deputy chairman of the board of VTB, estimates. With their curtailment, some potential buyers could move to the secondary housing segment, where the cost per square meter is lower, notes Tatyana Ushkova, chairman of the board of Absolut Bank. The availability of cheap mortgages is very important for the construction industry, about 80-90% of transactions are now made using borrowed funds, she explains.

ACRA expects proposed interest rates to be reduced to below 8%. “A number of banks, in the struggle for a client and against the backdrop of sluggish demand for corporate loans in the first half of 2023, are especially interested in continuing active mortgage lending,” says Irina Nosova, director of the agency’s financial institutions rating group.

However, the question is also what volume of limits will be allocated to banks to compensate for benefits. Of the 3.6 trillion rubles. loans available under the preferential mortgage program have already been issued for 3.1 trillion rubles. The new withdrawal limits that will be allocated to banks have not yet been announced.

Olga Sherunkova, Khalil Aminov