Russians were warned against early repayment of mortgages: it is better to earn money on a deposit

Look for who benefits

— Last year was a record year for the mortgage market. Consumers took out housing loans for almost 8 trillion rubles. The main driver of demand was preferential programs, which accounted for more than half of all issuances. However, the Central Bank began to take steps to cool the market: reducing subsidies, changing the down payment. What is the reason for this conflict: market participants report record results, and the Bank of Russia introduces restrictions?

Krichevsky: This can be explained very simply: it’s time to stop “feeding” developers. Which, from the moment the preferential programs are launched, essentially receive excess income at the expense of taxpayers. Judge for yourself: wages for the period from 2020 to the present have increased by an average of about 42% across the country. During the same time, apartments in new buildings rose in price by 102%, and secondary housing by 72%. Accordingly, buying a home is becoming increasingly difficult. It turns out that due to the flow of money from the developer to the bank and from the bank to the developer, real estate prices are rising. And all this is thanks to government money under preferential programs. Naturally, demand needs to be cooled. Let me remind you that before 2020, the average term of a mortgage loan was about 17.5 years, but now, for example, for a family mortgage it is 28 years. Therefore, the Central Bank is trying to correct this situation, including by raising the key rate.

Barsukov: In my opinion, the Central Bank acts more in political interests than in economic ones. Firstly, in its essence, preferential mortgages are flawed in the form in which they exist. It did not need to be renewed in 2022. Despite all the talk about the fact that benefit programs should be targeted, the situation does not change. The authorities mixed everything into one pile: support for developers, support for families with children, all sorts of regional development programs. However, there are no target indicators for them at all. I have never heard from any official who is involved in these programs that any goal was set for them. Meanwhile, it must be measurable, achievable within a certain time frame, and someone must be responsible for it. Well, the main beneficiaries of preferential mortgages are the banks, which received a guaranteed 3% income from loans issued. After all, what do families with children get from preferential programs? Family mortgages in 50% of cases are one-room apartments and studios. What kind of life can a family with children have in a small space? And if so, then there must be another support program. This means that state support programs need to be divided. And allocate money only to those developers who have problems, and not to everyone. At the same time, the Central Bank has already begun to say that there is no need to curtail preferential programs. This indicates that, in general, they are not against such a system, because banks earn good money thanks to it.

— Previously, some banks introduced additional fees from developers for each preferential borrower. To maintain current rates for programs with any form of government support, they began to take an additional percentage of the mortgage loan amount. Is this legal?

Yanin: The story of kickbacks for issuing each preferential loan should be the subject of investigation by the Federal Antimonopoly Service (FAS), because in this case, pricing in the mortgage market becomes completely opaque for the borrower. The person does not know what the real cost of this preferential housing loan is, taking into account the commission that the developer pays to the bank. One developer may pay 10%, another 7%. It is clear that all this is included in the cost per square meter. I believe that in relation to large developers and large banks, this story should be of interest to the antimonopoly service. Previously, only banks earned billions of rubles from preferential mortgages, having guaranteed budget funds – essentially, taxpayers’ money. Now financial institutions began to play a game with developers, who also made money on preferential mortgages by charging a commission. Now as for the citizens themselves who are applying for a preferential mortgage loan. Mostly these are quite wealthy people who have savings of 2–3 million rubles for a down payment. And the question arises: why is it necessary to support those who have 2–3 million savings using budget money? In my opinion, it’s high time to end this.

Recoil for borrowers, loss for banks

— In January 2024, in order to avoid panic in the mortgage market, the government allocated an additional 2.3 trillion rubles to finance preferential mortgage programs, and the limits have already been distributed among banks. How were subsidies distributed and how will this measure affect the behavior of banks?

Krichevsky: They are distributed very simply: whoever has a larger market share gets more subsidies. And, in principle, this is more or less logical. Because the larger the bank, the larger its share and the more loans it issues. As for the fees for this preferential mortgage, kickbacks are taken not only from developers, but also from borrowers. There were cases when people in not the largest banks were directly told: we will give you a preferential mortgage, but please put 5% of the cost of the apartment on the table in advance.

Barsukov: I understand that the topic is slippery, but I will still defend the banks a little. On the one hand, pay attention: who introduced the commissions? These are mainly banks with state participation. It’s strange to me that the state, as a shareholder, didn’t tell them: now you can’t make money from this. But the bank suffers losses. Look, banks used to have a 3% premium for issuing preferential mortgages on top of the key rate. That is, they were guaranteed to earn 3%. The key rate was, relatively speaking, 9–10%. It turned out to be a decent income. Today the government is reducing this premium to 1.5%. At the same time, the key rate is now 16%. As a result, banks earn much less. This is the first. Secondly, the Central Bank is tightening its reserve requirements, meaning that servicing mortgages is becoming more expensive for the bank. This means that not only does he earn little, but he also has to pay more. Issuing preferential mortgages for banks in the current conditions turns into a loss. Therefore, they began to take a commission from developers. But this problem also has a downside: large banks made good money on preferential mortgage programs for two years. Now the state tells them: “guys, you won’t earn that much anymore,” and banks, including those with state participation, respond with a demarche and say: “no, we want to earn money.” And they began to take from 7 to 15% from developers.

— The program for preferential mortgages with state support for new buildings at 8% per annum and family at 6% ends on July 1, 2024. The first will not be extended; the second is still being discussed. Is there a need for an extension? If the programs continue to operate, will any adjustments be made to them?

Barsukov: President Putin previously said that the family mortgage should be extended. Given this, it would be strange if the government decided that it would not do this. I don’t see any prerequisites for the preferential family mortgage program to be revised, for the government to take it and say: let’s increase the targeting, let’s extend the program to the secondary market. And this seems strange to me, since for a family with children it is a big problem to wait until the house itself is built, and then make repairs to it. Family mortgages are mainly used for one-room apartments and studios. Why? Because people take at least something from this situation – they need to live and raise a child here and now. Let it be an investment for the future, for a child, for yourself for retirement. But ideally, the program should apply not only to new buildings, but also to secondary buildings. It must take into account the specifics of an individual family.

— Is the issue of increasing targeting being discussed in the government?

Barsukov: Yes, but in what format? It is proposed to extend family mortgages to secondary housing only where new buildings are not being built. There were proposals to lower the interest rate on three- and four-room apartments for large families, but they were not heard. But in fact, we need to shift the emphasis from small housing to more spacious housing.

Yanin: It seems to me that now there is a bargaining between banks and developers, provided that there is less money in the budget to “feed” both of them. As for the story of expanding the supply of family mortgages on the secondary market, this is absolutely correct.

Inflation benefits mortgages

— If a person took out a preferential mortgage in 2023, should he worry about changes in the terms of his loan now?

Barsukov: There were such rumors. But in our country, for example, legal entities that took out a loan to purchase real estate suffer from raising the key rate. Individuals in Russia do not suffer from this. Our key rate is growing, but the loan rate remains the same. The only point is that for some preferential programs, banks have a note: if the state stops subsidizing the preferential program, then the rate may be the market rate. But our state does not stop subsidizing the loans that are issued. New ones, maybe it will stop. And those that were included in the budget, there are already clear numbers there. In this sense there will be no problems. Therefore, we actually have a paradoxical situation: if you have received a mortgage loan, then problems in the form of inflation only benefit you. Because anyway, your salary will increase after some time, and your payment will no longer be so large. Income is gradually growing, but the payment remains the same.

— If banks cancel the commission for the developer for each preferential buyer, then housing prices may fall?

Yanin: Reduced demand for apartments should lead to lower prices. So far I don’t see such a prospect. We need to wait 3-4 months and look at the reaction of consumers and the market as a whole. I hope that prices will at least stabilize. And indeed, inflation will make your loan cheaper and cheaper. But paying off loans early makes absolutely no sense. You can pay for a long time and watch how rubles depreciate and mortgage payments decrease.

Barsukov: Today, there really is no point in paying off mortgages and loans in general ahead of schedule, especially preferential mortgages. What I recommend doing: put the “extra” money on a deposit at 16%. You have a preferential mortgage of 8%. It’s much more than that. Keep your funds on deposit. Withdraw and carry money for early repayment of the loan only when the deposit rate is approximately the same as the loan, for example 10%. Today, a mortgage holder can make money by not repaying a home loan early. This is an important thing.

— If a person needs to buy real estate, what should he do? Should you take advantage of mortgage offers under current conditions or should you wait?

Krichevsky: It depends on what you are renting an apartment for. If it’s for yourself, then there are no questions, let’s go and take out a mortgage. If for investment, then now there are a huge number of instruments that will be much more profitable.

Barsukov: Preferential mortgages are very cheap today. Therefore, if you need an apartment for living, you need to take it now. You need to apply for a preferential mortgage with a minimum down payment. Even if you have 10 million rubles and want to buy an apartment for 12 million, then take the maximum loan on a preferential mortgage, and put the rest on deposit. This way you will also earn money. As for the apartments themselves, it is better to take a closer look at two or more bedroom apartments. There are a lot of one-room apartments and studios on the market now. In the future, problems may arise with the sale of such apartments.

Yanin: I would invest in a deposit now and see what happens to apartment prices in the future. If they remain standing, then you can return to the topic of buying an apartment a little later, having earned money on the deposit.