Russians’ debts have grown at a record level: what does this mean for the economy?

Expert Yanin: “More and more families will get into credit bondage”

The Russian population is not just living on credit, but is getting deeper and deeper into a debt hole. Over the 10 months of this year, the total loan portfolio of citizens has grown to almost 35 trillion rubles, an increase of 6 trillion, which was the maximum value in the entire history of observations. This is evidenced by the data of the Central Bank of the Russian Federation. About 60% of loans to individuals were mortgages, which were supported by preferential programs. MK found out from experts why this level of debt is dangerous for citizens.

The total volume of loans issued to the population for the period from January to October reached 34.8 trillion rubles. During this period, the total loan portfolio of citizens increased by 6 trillion rubles. For comparison, according to government forecasts, all federal budget expenditures in 2023 will amount to 29.056 trillion rubles, that is, with the money that citizens owe to banks, our country could easily exist for a whole year and still have several trillion left in the stash.

According to the head of the department for working with wealthy clients of the Fontvielle investment company, Sergei Solovykh, there are several reasons for such a rapid growth in the debt burden of citizens. Firstly, in 2022, Russians switched to a savings model of behavior, carefully planning expensive acquisitions. However, this trend gave way to the exact opposite consumer behavior against the backdrop of pent-up demand in 2023. Secondly, interest in borrowed funds was fueled by low rates, which from July 2022 to August 2023 were at comfortable levels of 7.5-8.5% per annum. In addition, mortgages made a more significant contribution to the overall increase in the debt burden of Russians this year: it accounted for almost two-thirds of the total portfolio growth. Interest in housing lending at the beginning of the year was fueled by the so-called “marketing rates” of mortgages from the developer “at 0%” per annum, preferential programs and the desire of Russians to secure comfortable conditions for themselves in the real estate sector while they are in effect. “As for unsecured lending, citizens’ inflationary expectations played a major role in the growth of the portfolio of this segment,” Alexey Volkov, Marketing Director of the National Bureau of Credit Histories (NBKI), confirmed the trend.

Opinions differ among expert communities about how dangerous the debt situation noted by the regulator is for Russians and the economy. Human rights activists believe that one of the consequences of this phenomenon will be an increase in the number of bankruptcies. “Such a huge increase in debt against the background of a stagnant economic situation in Russia is fraught with the fact that in the future families may face a decrease in income, loss of work and the risk of not fulfilling their obligations to banks,” says Dmitry, Chairman of the Board of the International Confederation of Consumer Societies (ConfOP). Ioannina. “This means that even more families will get into credit bondage. And developers and banks made money from this, and at the end of the year they received record profits.”

At the same time, financiers are confident that there is no reason for concern. “It cannot yet be said that as early as 2024 there will be negative consequences of the increase in debts of Russians due to an increase in the number of loans issued at the end of 2023,” says Natalya Milchakova, leading analyst at Freedom Finance Global. — The Russian economy is on the rise today, employment in the country is at a record high, real incomes of the population showed quite strong growth rates, which increased by 4.8% in annual terms over the first 9 months of 2023. And this means that the vast majority of borrowers will be able to timely service their debts to banks, avoiding delays.” Economists point out that the Bank of Russia has already taken measures to cool the loan market, including limiting the issuance of loans to individuals with a high debt burden, so our country is definitely not in danger of a “credit bubble” in 2024. According to the associate professor of the department of global financial markets and fintech of the Russian Economic University. Plekhanov Denis Perepelitsa, the growth of the debt burden carries a number of systemic risks for the banking system, but still seems uncritical. The probability of 100% repayment of loans in the record volumes specified by the regulator is low, but banks are able to ensure the stability of the financial system using their own resources, the expert believes.