Russians began to pay off mortgage loans ahead of schedule
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Mortgage borrowers have accelerated their exit from debt. According to the Central Bank, in April-June, the volume of early repayment of mortgages was the highest in a year and a half. Last year, against the backdrop of an unstable situation, Russian citizens preferred to save money and not make unnecessary expenses. In a more stable 2023, they spent part of the accumulated funds on an early exit from the mortgage.
In the second quarter, Russians spent more than half a trillion rubles (560.1 billion rubles) on early repayment of mortgage loans. This is the maximum amount over the past year and a half, follows from the information bulletin of the Bank of Russia (.pdf). The growth for the quarter amounted to almost 18%, in annual terms, the growth reached 73%. At the same time, the share of early repayment in the amount of repayment increased to 72.8%.
As Kommersant was explained in the Central Bank, the indicators of the second quarter are comparable to the data for the second quarter of 2021: “The increase in early repayment in annual terms is associated with the low base of last year, when there was a general situation of uncertainty in the mortgage market, which affected both issuances and and on redemption. In general, almost a quarter fewer mortgage loans were repaid early in 2022 than in 2021.
At the same time, in the last four quarters, the ratio of the volume of early repaid loans to the volume of loans granted has not increased compared to the levels of previous years and is in the range of 30-40%, the Central Bank specified. And the share of early repayment in the total amount of mortgage repayment does not exceed the peak values of the last three years (75-80%).
Among the reasons for the growth of early repayment, experts see several factors that could work in a complex way.
According to the National Bureau of Credit Histories (NBKI), one of the most likely factors was the expiration of the “super profitable” deposits in the spring of 2022, says NBKI marketing director Alexei Volkov. Then the growth of rates following the key rate of the Central Bank to 20% diverted the funds of the population in favor of bank deposits. Moreover, the lower mortgage rates (6.7–7.1% per annum) did not encourage rushing to repay, while high deposit rates, on the contrary, stimulated savings. As a result, in the second and third quarters of 2022, according to the data of the Central Bank, the volumes of early repayment were lower than in the same periods of 2020-2021.
Mikhail Mamuta, Head of the Consumer Rights Protection Service of the Bank of Russia, January 30, 2019:
“If a person had the confidence that he would be able to get a break if something happened, then there would be fewer early repayments.”
In general, the growth in early repayments is associated with a psychological factor: the population seeks to close mortgages and get rid of debts as soon as possible, says Maria Zholobova, head of the housing research department at the Dom.RF analytical center. There are opportunities for this. For example, according to Rosstat, in the first half of 2023, nominal wages increased by 12.7%, the expert notes.
According to VTB, as of the end of May 2023, the average mortgage maturity in Russia is 4.3 years.
According to Irina Babina, an analyst at the Mortgage Products Department of Rosbank, the average maturity of a mortgage in a bank has decreased from 7.7 to 3.6 years over the past ten years. This is several times lower than the average actual term of a mortgage loan, which, according to the latest data from the Central Bank, exceeds 24 years.
The growth dynamics of the dollar against the ruble in the second quarter of this year accelerated, which could potentially allow borrowers to convert part of their foreign currency savings into rubles and use them to pay off mortgage debt, said Nadezhda Karavaeva, junior director for banking ratings at the Expert RA agency. According to data from the Bank of Russia, Russians could allocate about $1.4 billion to convert foreign currency into rubles. At the same time, bank deposits in the same period were not as attractive as in 2022.
The majority of mortgage loans are covered by the borrowers’ own funds, and according to this indicator (91.3%), the past quarter was the third since 2019. In 2022, the share was 89%, in 2019-2020 – 85.5%. According to Grigory Zhirnov, head of corporate business analytics at Dom.RF Bank, “this is the result of two factors: household income growth and higher interest rates on market mortgages — they do not allow refinancing loans issued in 2020–2021.”
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