The Central Bank proposes to limit the receipt of preferential mortgages for one borrower

The Central Bank advocates that the preferential mortgage program be more targeted, said Elizaveta Danilova, director of the financial stability department of the Central Bank of the Russian Federation. According to the regulator, a one-time issuance of preferential mortgages in one hand will avoid investment demand, which amplifies price increases and reduces housing affordability.

“In order to increase targeting, it should be provided that preferential mortgages can be used only once. This would avoid additional investment demand when people take out several loans and invest in real estate,” said Ms. Danilova “Izvestia”.

In addition, the Central Bank believes that banks underestimate the risks of mortgages at a near-zero rate from the developer. For such types of loans, it is economically justified to increase the reserves, Ms. Danilova noted. “In the first quarter of 2023, it is planned to amend Regulation 590-P, which regulates the calculation of reserves by banks,” she added.

The representative of the Central Bank recalled that the regulator had previously proposed to the government to ban the combination of mortgages from the developer with the state preferential program. According to the Bank of Russia, this practice leads to the fact that citizens are offered a loan at an attractive rate, but “at the cost of overestimating the value of real estate.”

The Central Bank sees the risks of a “bubble collapse” due to attempts by banks and developers to stimulate demand for real estate purchases. “I would like to avoid this,” Ms. Danilova said. She noted that “if the deterioration of lending standards continues,” then an increase in mortgage surcharges will be discussed.

In the incomplete year 2022, banks issued more preferential mortgages than in previous years of the program. The volumes of December ahead of schedule exceeded the result of November. Issues traditionally grow in the last weeks of the year, when the demand for loans is stimulated, including New Year’s promotions.

Proposals to limit the issuance of preferential mortgages in one hand have been discussed before. Thus, initiatives were taken in State Duma and Accounts Chamber.

More details – in the material “Kommersant” “The mortgage was dismantled for the holiday”.

Leonid Uvarchev