The projected round of mortgage rate cuts is shifting. If earlier experts talked about the second half of the year, now they are inclined to believe that this can happen only in autumn
At its meeting on April 26, the Bank of Russia kept the key rate at 16% for the third time in a row. It has remained like this since December 2023.
Together with analysts, we are looking into whether the regulator will be able to cool demand with such a decision before the end of the preferential mortgage and when rates begin to decrease
The round of decline is shifting to autumn
As after the previous decisions of the Central Bank to leave the key rate at the same level, and this time mortgage rates will not change either, experts interviewed by RBC-Real Estate say. “The rates will remain approximately at the current level. Their decline can be expected no earlier than the autumn of 2024. However, [even then] there will be no noticeable reduction, the rates will be adjusted gradually,” said Irina Nosova, senior director of the ACRA group of ratings of financial institutions. “Market mortgage rates may decrease by about 2 percentage points from current values by the end of the year, while still not very comfortable for the borrower,” Irina Nosova added. Earlier, ACRA analysts predicted a decrease in the key rate and market mortgage rates in the second half of the year. Thus, the expected period of rate cuts has shifted.
Analysts of FG Finam gave a similar forecast. At the current meeting, the Central Bank raised the forecast for the average key rate for 2024 from 13.5–15.5% to 15-16%, said Finama analyst Polina Shchukina. According to her, against this background, the regulator may move to lower interest rates by the end of 2024 in response to changes in the economic environment or achieved macroeconomic goals. Earlier, it was about the second half of the year, the expert said. “Yes, the round of rate cuts may shift, but we need to monitor the information at subsequent meetings of the Central Bank. The reduction of mortgage rates itself will be co—directed with the movement of the key rate,” explained Polina Shchukina.
According to Expert RA forecasts, a decrease in the key rate and mortgage rates is expected only in the second half of the year. “At the moment, we expect that by the end of the year the key rate will be able to drop to 12%, which will allow customers to get a mortgage at a rate of about 13% per annum, excluding preferential programs,” said Ksenia Yakushkina, Director of Banking Ratings at Expert RA. In the absence of dynamics of the key rate, the cost of mortgage loans will remain unchanged for the time being, Ksenia Yakushkina added.
The VTB press service stated that they do not intend to change the price conditions for credit products yet. “The decision of the Central Bank itself means that the summer season will open with high rates on retail loans and the consumer behavior model of Russians will remain with a focus on savings,” the bank explained.
The projected round of mortgage rate cuts is shifting. If earlier experts talked about the second half of the year, now they are inclined to believe that market rates on housing loans will begin to decrease only in the fall (Photo: Evgeny Razumny/ TASS)
What are the mortgage rates in April
According to the Institute of Housing Development “Dom.The Russian Federation”, at the end of April, the weighted average mortgage rate for new buildings is 16.76% per annum, in the secondary market — 16.94%, the refinancing rate is 16.98%. Rates for preferential mortgage programs range from 2% to 8%.
Surge in demand on the eve of the completion of preferential mortgages
Against the background of high rates on market loans, mortgage loans in 2024 are inferior to last year’s figures, and the main demand is for preferential programs, the rates for which are several times lower. “We expect this trend to continue during the remaining months of the first half of the year,” said Expert RA, Director of Bank Ratings.
But even with a decrease in market mortgage rates in the second half of the year, the issuance will still not reach the values of last year, since the preferential mortgage on new buildings is due to end on July 1, the expert explained. In general, according to Expert RA’s forecast, the total volume of disbursements this year will be about 30% lower than last year.
However, before the end of the program, experts admit a short—term increase in demand for mortgages – people will try to get a loan on favorable terms before July 1. “May mortgage loans will be comparable to April ones. However, in June we will see a noticeable increase relative to May — within 40%, primarily due to the termination of the preferential mortgage program with state support, as well as due to the greater number of working days per month,” explained the senior director of the ACRA group of ratings of financial institutions. At the same time, the volume of disbursements in May-June 2024 will be comparable to last year’s levels, she added.
Before completing the program, experts admit a short—term increase in demand for mortgages – people will try to get a loan on favorable terms before July 1 (Photo: Oleg Spiridonov/ TASS)
A similar point of view was expressed by the analyst of Finama. According to her, on the eve of the completion of the preferential program, demand will temporarily increase, as consumers will want to have time to take advantage of more favorable conditions. But in general, mortgage loans will be inferior to last year’s figures. “If new support measures are not introduced after the completion of the preferential mortgage, demand may temporarily decrease due to an increase in the cost of lending to consumers. The impact of the completion of the preferential program can be significant, as it makes mortgages more accessible to a wide range of borrowers,” explained Polina Shchukina.
NKR analysts also expect an increase in demand on the eve of the completion of preferential mortgages for new buildings. According to their calculations, in June, the demand for mortgages against the background of the cancellation of the preferential program, under which loans are issued at 8% per annum, may repeat the record of September 2023, when loans amounted to 955 billion rubles. However, as a result of tightening conditions and the end of the issuance of mortgages with state support at 8% by the end of 2024, the volume of mortgage loans may decrease by 15-25% compared to the record of 2023 (7.8 trillion rubles), to 5.8–6.4 trillion rubles, the NKR predicts.
Experts from VTB Bank are waiting for a doubling of mortgage loans before completing mortgages on new buildings. According to their forecasts, in the second quarter of 2024, Russians will take out mortgages for almost 2 trillion rubles, which is almost twice as much as in January — March (1.05 trillion rubles). Starting from the second half of the year, the housing lending market will begin to cool, they note.
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