Banks reject almost 80% of Russians’ applications for loans, and the share of refusals for mortgages is approaching 60%, despite the reduction in the key interest rate. The Central Bank explains that the tightening of selection by banks is associated with an increase in overdue loans issued earlier.
Mortgages have not become more affordable, despite the reduction in the key interest rate. Banks reject almost 80% of Russians’ applications for loans, Izvestia writes, citing data from the National Bureau of Credit Histories. For mortgages, the failure rate is approaching 60%.
The Central Bank notes that the tightening of selection by banks is associated with an increase in overdue loans on previously issued loans. The Bank of Russia restricts the issuance of loans to borrowers with a high debt burden. And next year, as the Central Bank recently announced, when approving mortgages, banks will take into account only the official incomes of citizens.
How will this affect the ability to get a loan? Dmitry Rakuta, founder of the Mortgage Brokers Association, argues:
Dmitry Rakuta, founder of the Mortgage Brokers Association, real estate expert “In general, the Central Bank continues its policy of whitewashing the lending market, including the mortgage sector. Besides, they want to kill two birds with one stone with such decisions here. On the one hand, the official income that actually goes to the Pension Fund whitewashes most of the economy, because we all understand perfectly well that there are private companies that pay their employees the minimum official salary, and the rest goes on the payroll. That’s probably how 70-80% of the entire market works now. And a borrower who receives an official minimum income will not be able to take out a mortgage in the future, and he wonders if he should look for another job. Apparently, the Central Bank’s line is still taking over, because, for example, the Ministry of Construction says that we are currently experiencing difficulties in the real estate market as a whole, and bankers say that the number of applications is decreasing. The preferential program is also not so profitable, the initial payment is increased, the requirements are tightened, and so on. On the other hand, so far the Ministry of Finance and the Central Bank have their own truth, they are bending the line of tightening and think that in general both the banking sector and developers will be able to adapt to the current realities. Yes, there really is a kind of imbalance here, there are many statements that mortgages should be available, that it is necessary to build new housing, because there are a lot of dilapidated and dilapidated housing in the country. On the other hand, the possibilities of acquiring new housing are limited.”
According to experts, now, even if the debt burden is 50% of income, the risk of mortgage failure is very high. Ekaterina Shchurikhina, Director of Bank Ratings at Expert RA agency, talks about the reasons.:
Ekaterina Shchurikhina, Director of Bank Ratings at Expert RA Agency, “Most likely, the fact that when the market rates are high, this monthly payment, which is calculated at high rates, is large, leaves its mark here. When banks calculate the borrower’s debt burden, the ratio of monthly payments to total income, this indicator turns out to be higher than it was when rates were at 10%, for example. And of course, for many clients, this figure is above 50%. In principle, it is considered that above a third is already a fairly high level of creditworthiness, but banks probably also look at the borrower’s total income, because if the income is large, then, for example, the level of 50% may be adequate, since a fairly large part of the income remains with the borrower for their expenses. And if the income is not very large, then the level of 50% may be prohibitive simply because the free part of the income is quite small.”
Nevertheless, the secondary housing market in Moscow has been experiencing a boom for several weeks now, related not only to seasonality, but also to the lowering of the Central Bank’s rate, a market participant who wished to remain anonymous told Business FM.
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The July decrease from 20% to 18% affected Sberbank’s mortgage rates: you can take out a loan for a secondary one at 20%, although before the July decrease it was 26%. Clients expect a further downward trend from the Bank of Russia and plan to refinance with another bank at a more favorable interest rate in this case.
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