Preferential mortgages are leaving the street

Russian banks are tightening lending under preferential mortgage programs. A number of players have already decided to issue loans only from those developers who will pay the subsidy, and some players, for example Gazprombank, have completely suspended issuance for third-party clients. Banks have cooled down on mortgages after the reduction of budget subsidies. A number of experts expect a two-fold decrease in mortgage issuance in January.

Gazprombank (one of the top 20 mortgage banks in Russia) from the beginning of 2024 decided to suspend the issuance of preferential mortgages under state programs to clients “from the street”. A corresponding letter was sent to the bank’s partners, one of Kommersant’s interlocutors in the mortgage market knows. Officially, the bank refused to comment on the situation.

We are talking about preferential mortgages at 8% for new buildings, family mortgages at 6%, IT mortgages at 5% and Far Eastern mortgages at 2%. According to Kommersant, the decision affected only clients “on the street.” The bank’s salary clients still have the opportunity to obtain loans under government programs. It is unknown how long the “freeze” will last.

GPB has already taken steps to reduce mortgage services for third-party clients, sharply raising the level of the minimum down payment – immediately to 50%, which the market considered to be actually a “barrier” level (see “Kommersant” dated December 18, 2023). Rosbank later introduced a similar level of down payment (according to its own programs).

Other large banks are willing to issue mortgage loans only if the developer will subsidize them. In particular, Sberbank and VTB will begin issuing preferential mortgages for the purchase of housing in January only if they are subsidized by an accredited developer (see Kommersant of December 27).

Alfa Bank also told Kommersant that they “plan to issue preferential programs when subsidizing developers.” VTB reported that the decision was dictated by “tightening government requirements for preferential mortgages.”

As Sergei Gordeyko, the chief expert of Rusipoteka, notes, now each of the banks acts “on its own”: some introduce commissions for developers, some impose increased requirements for the down payment, some cancel discounts and other preferential options for partners in the mortgage market. Probably, those who follow the path of reducing issuances, rather than introducing subsidies for developers, simply do not have a proper portfolio of project financing that could be used as leverage, the expert notes.

It is now unprofitable for banks to lend under preferential mortgage programs due to a combination of two factors: an increase in the Central Bank key rate (currently 16%), which provoked an increase in the price of the entire deposit portfolio of banks, and a decrease in the amount of subsidies from the government (since December, compensation for lost income has been carried out according to the scheme key rate plus 1.5 p.p. minus the loan rate). “After this, the profitability of mortgages decreased, so for some banks lending under preferential programs is unprofitable, while for others it is on the verge of unprofitability,” sums up Gordeiko.

Banks are compensating for lost income due to a decrease in the size of the subsidy, explains Yegor Lopatin, director of the financial institutions rating group of the NKR agency. At the same time, according to his assessment, this will have a moderate impact on the dynamics of the segment, “since, despite the likely increase in prices, rates under preferential programs are more than half lower than market rates.”

However, senior director of the ACRA group of financial institution ratings, Irina Nosova, expects that “in January we will see a two-fold decline in issuances: primarily due to fewer days and low activity of the population, as well as due to stricter requirements and high rates on mortgage loans.” Already in the autumn months, issuances from individual banks were declining. According to JSC Dom.RF, in November VTB and GPB reduced government support payments in monetary terms by 17% and 30% compared to October.

Olga Sherunkova