Primary Home Mortgage 2023: Rates Rise
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Weighted average mortgage rates on loans for housing in new buildings exceeded 6% per annum, reaching a maximum since the fall of 2021. One of the reasons in the market is the curtailment of programs with a subsidy from the developer, after the Central Bank tightened regulation. Issuance of mortgages in the primary market in April fell by 8.8%. Some players believe that the trend to increase rates has almost exhausted itself. However, most experts see no reason not only to reduce, but also to stabilize rates, expecting moderate growth in the coming months.
The Bank of Russia published data on the situation in the mortgage market in April. According to the regulator, by the beginning of May, the weighted average rate on loans for new buildings exceeded 6%, reaching a maximum since September 2021 (then the rate was at the level of 6.24%).
Rates have been rising for the fourth month in a row. In general, in January-April, the growth amounted to 2.54 percentage points (p.p.). The Central Bank provides data on the weighted average ruble rates on mortgages issued during the month. For comparison: according to JSC “Dom.RF”, the rates of offers for market mortgages in the primary market of the largest players as of May 26 are 11.06% per annum (in the secondary – 11.16%). At the same time, the weighted average rate on family and preferential mortgages for new buildings was 5.6% and 7.62%, respectively.
In April, according to the Central Bank, it was issued 8.8% less than the March volume of mortgages in the primary market (in the amount of 200.4 billion rubles). Of these, 94.1 billion rubles are under preferential programs (family, Far Eastern, IT mortgages and mortgages with state support), specify Dom.RF.
Thus, preferential mortgage programs accounted for about 47% of loans in April. Most of it in April came from family mortgages (52 billion rubles), another 32.5 billion rubles from state-supported mortgages.
The average loan size in the primary market in April amounted to 4.8 million rubles, while the volume of the mortgage portfolio reached 3.6 trillion rubles.
As noted in the commentary to the data of the Central Bank, the growth of rates in the primary market was facilitated by a decrease in the issuance of loans at ultra-low rates in the framework of programs with developers. Market participants and experts agree with this.
According to the chief expert of Rusipoteka Sergey Gordeiko, the growth of rates in the primary market continues to be influenced by the withdrawal of programs subsidized by developers.
Yegor Lopatin, Deputy Director of the Group of Ratings of Financial Institutions of the NKR Agency, also named among the reasons an increase by 1 p.p. of the rate on preferential mortgages (up to 8%) since the beginning of the year and the introduction of increased premiums on classic mortgages with a low down payment and an increased debt burden (see “Kommersant” dated September 19, 2022).
“Mathematically, there is an increase, but when converted into an average mortgage payment, there is an insignificant amount of increase for an average loan – about 500 rubles. per month,” notes Mr. Gordeiko. “Besides, banks are now trying to compensate for the increase in rates by easing on other, non-price terms of the loan, demonstrating a calmer attitude to risks, unlike the regulator. Now there are no factors that can cause a downward trend in rates, on average they will continue to grow by hundredths of a percent weekly.” This situation, according to his expectations, will last all summer.
At the same time, VTB believes that in May the growth of the average cost of loans for primary real estate will slow down, and if the macroeconomic situation is favorable, it may even stop altogether.
“Restraining factors will be the growing popularity of family mortgages as a result of its expansion to all families with two minor children, as well as the adaptation of market participants to new mortgage conditions from the developer,” the bank believes.
Mr. Gordeyko clarifies that “the solvency of customers is not increasing, but mortgage borrowers continue to demonstrate high responsibility in repaying loans.” This is confirmed by the data. In particular, the share of overdue debt in the total mortgage portfolio remains at the level of 0.4%.
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