The Central Bank plans to introduce four limits on mortgage issuance, but will use only two

Director of the Financial Stability Department of the Central Bank Evgeny Rumyantsev said that the regulator intends to introduce four macroprudential limits (MPLs, which help limit lending to borrowers with a high debt load) for issuing mortgages, but plans to use only two of them. The other two limits, according to him, will be reserve ones.

“We plan to have four macroprudential limits, but realistically, if we had these powers today, we would only use two. The first concerns limits on finished housing, and the second – on housing under construction secured by equity participation agreements,” Mr. Rumyantsev said at a meeting of banks with the Central Bank (quoted from “Interfax”).

The two MPLs, which the Central Bank representative called reserve, relate to loans for individual housing construction (IHC) and other consumer loans secured by housing. Evgeny Rumyantsev clarified that there are no systemic risks in these segments and they do not pose a threat to financial stability.

The Central Bank is also considering the option of introducing a separate limit for microfinance organizations in order to eliminate regulation circumvention schemes. Limits on the issuance of mortgages will be set depending on the debt load indicator, as well as the ratio of the loan size to the value of the collateral and down payment.

Evgeny Rumyantsev added that the limits will not apply to military mortgages, individual loans for refinancing problem debt and mortgages issued in the DPR, LPR, as well as in the Zaporozhye and Kherson regions. The Central Bank will set the limits no later than two months before the quarter for which the MPL is established.

In January, DOM.RF CEO Vitaly Mutko said that the state-owned company may revise the rules for issuing limits to banks allocated by the country’s budget to support mortgages at state-subsidized rates. According to him, these funds can be redistributed in favor of banks that did not introduce a commission for developers for each home buyer who takes out a preferential mortgage. In particular, Sberbank, VTB and Alfa Bank, whose combined share in the country’s mortgage market reaches 85%, may lose government subsidies to cover expenses.

Read more in the Kommersant article. “Dom.RF expressed itself very clearly”.