Nabiullina told when mortgage rates may decrease

The head of the Central Bank called predictably low inflation on a long-term horizon the main condition for reducing rates on long-term loans. She recalled that the market mortgage rate was about 8%. This was achieved due to low inflation

Stabilization of inflation in the long term will reduce the rates on market mortgages. This was stated at the conference by the head of the Central Bank Elvira Nabiullina.

“A mortgage is a long—term loan. Long-term rates are determined not so much by the level of the current rate (key. — Ed.), how many expectations both banks and borrowers have regarding what inflation will be and what the key rate will be throughout the entire cycle, as long as the loan lives,” Elvira Nabiulina explained.

In order for long-term loan rates to decrease, inflation needs to be predictably low. “Not only at the moment, but so that the market has confidence that this inflation will be low during the period for which the mortgage loan is issued — this is 10-15-20 years,” said the chairman of the Bank of Russia.

She stressed that it is fundamentally important for the Central Bank to return inflation to the target faster and show that even if inflation deviates from the target in the face of shocks and external constraints, the regulator stabilizes it again.

Nabiullina recalled that the market mortgage rate was at the preferential level — about 8%. This was achieved due to low inflation — about 4%. “Therefore, it is very important for us to return inflation to the target, the key rate will be close to neutral and this will allow market mortgages to develop,” she concluded.

On September 13, the Bank of Russia raised the key rate from 18% to 19% per annum. This is the second consecutive rate increase, in July it was increased by 2 percentage points, from 16% to 18%. The regulator explained its decision by high inflationary pressure. Annual inflation (the Central Bank’s target for it is 4%) slowed to 9.05% in August after 9.13% in July, but this is still higher than in June (8.6%) and the spring months (then inflation was in the range of 7.5–7.8%).

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