Preferential mortgages were deprived of benefits: what will happen when increasing the down payment amount?

Economist Belyaev named those who benefited from the government decision

The state has tightened the conditions for preferential mortgages for Russians, increasing the minimum down payment from 15% to 20%. Everything was moving towards this decision: plans to adjust the conditions of the relevant programs were repeatedly announced by the Ministry of Finance and the Central Bank. Meanwhile, the measure is a classic double-edged sword: on the one hand, the clearly overheated mortgage lending market needs to be cooled, and on the other, some citizens will finally give up hope of finding their own home.

According to its Resolution No. 1474, the government not only raised the down payment percentage, but also reduced by 0.5% the maximum amount of subsidies for banks that issue mortgages under preferential government programs. Let us remind you that their mechanism works like this: by issuing loans at reduced rates, banks receive monthly compensation from the budget in the amount of lost interest up to the key rate (currently 12%), increased by an average of 3%. The down payment on a mortgage with state support does not depend on the type of program.

“The formula is structured so that when the rate rises, the budget pays more, and banks actually earn more, so now there is a discussion about adjusting (the size of the down payment – “MK”),” the director of the department said last week financial policy of the Ministry of Finance Ivan Chebeskov.

The position of the Ministry of Finance, which is called upon to take care of the state of the treasury and minimize expenses, is extremely clear. The Central Bank is concerned about something completely different – the obvious overheating of the market and the risks that stem from this trend. According to the Central Bank, in July the volume of mortgages issued with state support increased by 12% (to 360 billion rubles from 321 billion in June) due to both main programs – “Family Mortgage” and “Preferential Mortgage”. The regulator points to the natural desire of people to invest in real estate against the background of the volatility of the ruble exchange rate and rising inflation expectations. The problem is that the growth of the mortgage portfolio is largely due to borrowers with a high DNI (debt burden indicator) and, accordingly, a deterioration in lending standards. According to the Central Bank, the preferential mortgage project, which was implemented back in the pandemic spring of 2020 as an anti-crisis and temporary project (initially for a quarter), has been unacceptably delayed.

A sharp jump in demand for preferential mortgages this summer has exacerbated the imbalance between supply and demand. There is an overheating of not just the consumer lending market, but the entire economy, notes leading expert at the Center for Political Technologies Nikita Maslennikov. Plus, a slowdown in economic dynamics is expected in Russia in 2024: if at the end of this year (according to the forecast of the VEB Institute) GDP will increase by 2.7%, then next year it will increase by 1.1%. Accordingly, the purchasing power of the population will also decrease, whose salaries and real disposable income, to put it mildly, will not increase much. This raises questions: how will people service mortgages taken out today tomorrow? And what will happen to the banks? After all, they must insure themselves against risks by increasing the volume of required reserves and ultimately losing profit.

“The government takes all this into account in its decision,” says Maslennikov. – But, in addition to the task of cooling the market, there is, of course, also a purely financial motive: the current measure will ease the burden on budgets of different levels (in terms of subsidies), shifting some part of it to borrowers. In any case, preferential mortgages will retain their leadership in the market, but at the same time the risk component of demand will fade away. But it’s difficult to say now what will happen to real estate prices, let’s wait at least a month.”

The new conditions will lead to a decrease in the affordability of apartments for many citizens. At the end of August, the average cost per square meter in Russia was 74.5 thousand rubles – 18% higher than a year ago. On average across the country, people will have to overpay about half a million rubles for the down payment on a preferential mortgage (in addition to the current “average” one and a half million), which is extremely difficult given the current situation with salaries, argues Candidate of Economic Sciences Mikhail Belyaev. Well, developers will probably raise prices in order to maintain the same level of profit. According to the expert, the minimum down payment of 20% is beneficial, first of all, to the state: this will allow it to subsidize banks less from the budget, compensating for their expenses on the preferential mortgage program.