The share of highly leveraged mortgage borrowers begins to decline

The share of highly indebted mortgage borrowers in their total volume, which has grown sharply over the past two years, may significantly decrease in 2024 – by a third, according to Expert RA agency estimates. The reason, according to analysts, will be primarily tightening regulation. Against the backdrop of a general slowdown in the mortgage market, the loss of such clients could create risks for the bankers themselves and negatively affect the real estate market. Although, at least for credit institutions, experts see opportunities for portfolio diversification.

Expert RA expects that in 2024 the share of mortgages issued to borrowers with a debt burden ratio (DLI) of more than 80% will decrease from 45% (this level was at the beginning of the year) to 30%. According to the Central Bank, over two years this share has increased 1.5 times. The peak was observed in the third quarter of 2023, when it reached 47%.

In the entire mortgage portfolio of Russian credit institutions at the beginning of the year (18.2 trillion rubles), according to the Bank of Russia, borrowers with personal income tax of more than 80% accounted for 35%.

Roman Koenigsberg, head of the internal audit and risk management department at the auditing and consulting company FBK, believes that the increase in the share of high-risk loans was also due to the rise in real estate prices. In particular, according to SberIndex, since the beginning of 2020, the average price per square meter on the secondary market has increased almost 1.8 times, to 104.8 thousand rubles, on the primary market – more than doubled, to 151.4 thousand roubles. in March 2024.

A number of factors can reduce the debt load of mortgage holders: a fall in the value of real estate (which will lead to a reduction in the size of the loan required for its purchase) and interest rates, as well as an increase in citizens’ incomes, notes Mr. Koenigsberg: “However, there is no sustainable prospect for the implementation of all these factors” .

A decrease in the share of high-risk mortgages in the structure of issuances will occur “against the backdrop of tightening regulation,” Ksenia Yakushkina, director for bank ratings at Expert RA, explains the agency’s assessments.

Since March 2024, the Central Bank has additionally increased macroprudential buffers on mortgage loans with a high personal income tax; moreover, it is expected that from July the Central Bank will be able to introduce macroprudential limits on mortgages.

In order to underestimate the calculated PDI, banks practiced increasing loan terms in order to reduce the regulatory burden on capital. However, this carries risks of deterioration in debt servicing in the future, according to Expert RA. They believe that in the future it is possible that restrictions will also apply to the maturity of loans.

However, bankers say that the tool has already exhausted itself. “Banks have practically exhausted the potential for extending the lending term, since most loans are now issued for maximum terms of 25–30 years,” admits Vitaly Kostyukevich, director of the retail products department at Absolut Bank. “An even greater increase in the term can only be a marketing ploy.”

Sberbank, Dom.RF Bank, Alfa Bank, Rosbank and Sovcombank, Uralsib, which are among the top 10 mortgage banks according to the Expert RA rating, did not answer Kommersant. VTB noted that the share of mortgage borrowers with a personal income tax level above 80% in the structure of VTB loans began to decline from the fourth quarter of 2023: “First of all, this is due to the measures of the Central Bank – now the vast majority of our borrowers, when applying for a mortgage, document their solvency.” Previously, clients could apply for a loan using a simplified scheme.

Experts warn that the loss of the category of borrowers with high credit loads could create risks for banks and developers. “A decrease in the share of such loans may affect the growth rate of the portfolio, since they occupy a significant share,” explains Mr. Koenigsberg. In addition, according to him, “banks may find themselves in a trap if they stop issuing mortgages, since this will reduce the demand for real estate and its value, on the other hand, banks have significant amounts of assets (already issued mortgages) secured by the same real estate.”

Expert RA confirms that this year there may be a “noticeable slowdown in the dynamics of the mortgage portfolio” against the backdrop of a forecast for a decline in mortgage issuance by 30%. At the same time, Roman Koenigsberg admits that bankers “have alternative segments to diversify their loan portfolio.”

Olga Sherunkova