Rates on non-concessional loans are approaching 20% ​​per annum

Russian banks continue to raise rates on their own mortgage programs. Average rates have already exceeded 15% per annum, and in some cases reach 18%. Borrowers can still afford such rates, but in such a situation demand will shift to the preferential mortgage segment. Here the rates are several times lower, but the programs are focused on the primary housing market. At the same time, against the backdrop of expectations for a further increase in the key rate of the Bank of Russia, experts do not rule out raising mortgage rates to 20% per annum.

Since the beginning of the month, 12 large banks have increased rates on mortgage loans, according to data from the analytical company Rusipoteka and JSC Dom.RF. Just last week (from October 13 to October 22), Promsvyazbank and Bank St. Petersburg raised rates by 1.1 percentage points (p.p.), Ak Bars Bank – by 0.1–0.5 p.p. p. According to Rusipoteka, average rates on a standard mortgage with a down payment of 30% for clients “off the street” exceed 15% per annum, while for certain bank programs they can reach 18% per annum. For example, in Gazprombank and AB Rossiya the rates exceed 16% per annum, in Uralsib, Raiffeisenbank, Absolut Bank, Alfa Bank – above 15% per annum.

However, the rate of 15% per annum for the Russian market cannot be considered prohibitive. “The mortgage rate was at similar values ​​in both 2015 and 2009,” recalls Alexey Volkov, Marketing Director of the National Bureau of Credit Histories. “And it cannot be said that mortgage lending then dropped to zero,” he notes.

However, rates on preferential mortgage state programs, which are aimed at purchasing real estate on the primary market, remain two times or more below market rates.

And the popularity of such programs will only grow, which requires increasing the limits on the issuance of such loans, the Ministry of Finance noted in an explanatory note last week. The Ministry of Finance proposes the next (see “Kommersant” dated October 2) increasing the limit on issuances for preferential mortgages (rate up to 8% per annum) from 5 trillion to 6.04 trillion rubles, for “family mortgages” (rate up to 6% per annum) – from 3.4 trillion to 4.64 trillion rubles.

“From mortgage applications, it is clear that the demand for preferential programs is high; there are more refusals for market mortgages,” notes Sergei Gordeiko, chief expert of Rusipoteka. At its peak, the share of preferential mortgages in sales is no more than 40% and is limited by the share of loans to the primary market, he adds. “But now there will be a imbalance and the growth in the share of new buildings will generally increase, and the share of preferential programs may show a record value,” the expert believes.

Moreover, market participants assess the trend towards increasing rates as long-term. Thus, Mr. Gordeiko does not rule out raising rates “after some time” up to 20% per annum. This rate level has already been exceeded after the Central Bank set the key rate at 20% per annum in February 2022. At the same time, the expert believes, there is no longer any limit, especially in anticipation of a further increase in the key rate. The previous time, the Central Bank raised the key rate on September 15 by 1 percentage point, to 13% per annum. At the next meeting on October 27, analysts expect another increase from the regulator.

According to Sergei Gordeiko, at current market rates, mortgages will most likely be taken only “out of desperation” in certain cases, for example, when the urgency of a deal is important, there are unfinished processes, for example, the sale of an “old” apartment, etc. According According to Mr. Volkov, loans will continue to be taken, but less actively, “much will depend on lenders, how much they can soften the conditions for quality borrowers.” However, the increase in the financial burden of borrowers “will be significant,” warns Mr. Volkov. “At a rate of 8% per annum, the overpayment for a twenty-year loan with a down payment of 20% will be only 100%, while at a rate of 15% per annum it will be 200%,” he points out.

Against the backdrop of rising rates, refinancing mortgage loans has also lost relevance. The average rate for such a service also reached 15% per annum, according to Rusipoteka data. But there is no demand for this product now, and in the coming months it will remain dormant, notes Vitaly Kostyukevich, director of the retail products department at Absolut Bank. “Mortgage loans were issued for the most part at lower rates, and, of course, no one will switch to a new bank at a higher rate,” he explains. Moreover, as practice shows, even after the mortgage rate begins to decline, clients often prefer to wait a little, since refinancing is a product that cannot be used often, notes Mr. Kostyukevich.

Olga Sherunkova