What is behind the abnormal growth in the issuance of mortgage loans: experts called the risks

Surge in housing subsidies threatens to turn into a financial bubble

There is a surge in demand for market and preferential mortgages in the country. This is evidenced by the latest data from the Bank of Russia. The issuance of mortgages on market terms in March increased by 30% compared to February, and within the framework of preferential programs, the growth amounted to 40%. In general, mortgage growth rates approached the pre-crisis level. However, independent experts see such a rapid growth as a source of risks of inflating a financial bubble. After all, the rapid growth of mortgage lending is taking place against the backdrop of an economic recession that has not yet been overcome in the country and a fall in real incomes of the population. Will people who have voluntarily shouldered the yoke of credit for years to come be able to pay their debts?

In March, Russian banks accelerated the growth of their mortgage portfolio to 2.1% from 1.5% in February, which is generally in line with the average monthly rate for 2021 (+2.3%). This is stated in the review of the Central Bank of the Russian Federation, dedicated to the dynamics of the banking sector.

According to analysts, the issuance of market mortgages in March increased by 30% – up to 277 billion rubles. (in February it was 213 billion rubles). Issuance of preferential loans increased by 40% – up to 293 billion rubles. (from 209 billion rubles in February).

The most popular program in March was Family Mortgage. Issues under it increased by 42% – up to 142 billion rubles, which accounted for about half of all issues under state programs. Issuance of “Preferential Mortgage” also increased – by 32%, to 119 billion rubles. In addition, they were supported by the programs of “preferential mortgage from the developer” combined with it, according to the materials of the Central Bank.

What caused such a rapid growth in housing lending in March? Artem Deev, head of the analytical department of AMarkets, in a conversation with MK, he named three reasons for what is happening. The first is a general improvement in consumer sentiment (they are also recorded by the Central Bank and Rosstat). That is, the various shocks of last year for the population are now smoothed out and are not perceived as force majeure. Against this background, the overall consumer demand is increasing – which is also confirmed by the data of the Central Bank on the increase in the consumer portfolio.

The second reason: the growth of the dollar in March, because of which citizens again preferred to invest in real estate to protect their existing funds. “Although investment demand remains under pressure, some mortgage loans are issued for such objects,” the analyst believes.

And the third reason for the growth of mortgages, in his opinion, is that consumers are afraid of an increase in interest rates on loans. “It is no coincidence that the data of the Central Bank indicate that special preferential programs are very popular with borrowers,” Deev notes.

But the question arises: will not such a sharp rise in mortgage lending lead to another financial bubble in the market? “In February, the Central Bank announced that it would fight the programs of developers who sell real estate at extremely low rates (about 0%),” recalls Ivan Samoylenko, Managing Partner, B&C Agency– Since these programs are able to create a bubble in the mortgage market and are not really as cheap as developers claim. Then, already in March, the regulator set the deadlines for such programs to cease to exist – from June 1, 2023. Also, with the beginning of summer, the Central Bank is tightening risk ratios for borrowers, so that the ability to take out a mortgage will decrease for many.

It is quite possible, the expert believes, that these news led to the fact that people began to actively take real estate on credit – they fear that such an opportunity will not be later. “Because there are no more real reasons for such growth: prices have soared unjustifiably (twice in two years), and the real disposable incomes of citizens, to put it mildly, have not increased at the same pace,” Samoylenko continues.

He notes that the demand for mortgages in 2020-2022 was stimulated by a preferential program from the state (first at 6% per annum, then at 7%), while more than half of the loans in the country during this period were issued on preferential mortgages. Now in this segment (beneficial programs) there is a decrease relative to the peak in 2021, so the recorded growth is still very far from the records. “This is more a reaction to negative expectations: the Russians are trying to buy real estate at low rates while they are,” concludes the interlocutor of MK.