Experts interviewed by RBC-Real Estate expect a new round of mortgage rate increases within 1 percentage point. At the same time, the regulator’s decision will no longer have a significant impact on demand, since rates are already very high
At the meeting on Friday, September 13, the Central Bank raised its key rate by 1 percentage point, to 19% per annum. This is the second consecutive rate increase, in July it was increased by 2 percentage points, from 16 to 18%.
Together with experts, we are looking into how the decision of the Bank of Russia will affect the mortgage and housing market.
The stakes are even higher
Experts interviewed by the editorial board of RBC-Real Estate expect a new round of increase in market mortgage rates — within 1 percentage point, especially since the largest banks (Sberbank, VTB, Alfa-Bank) increased deposit rates without waiting for the Central Bank’s decision on the key one.
Current mortgage rates are from 21% and above
According to “Dom.As of September 8, the average market mortgage rate for new buildings is 20.88% per annum, for secondary housing — 20.84%. We are talking about the rates offered by the top 20 banks. For comparison, a year ago the rates were at the level of 13-14%.
“Any increase in the key rate leads to credit rates that increase proportionally. An alternative solution is to reduce operating costs and profit margins, but this option was mostly already chosen earlier,” explained Alexander Tsyganov, Head of the Department of Mortgage Lending at the Financial University.
According to him, mortgage rates may rise within 1 percentage point, but not all banks will take this step. “The stakes are still high. Therefore, they will not announce the increase much. Rather, the increase will be revealed while working with a specific borrower, and not in advertising,” said Alexander Tsyganov. At the same time, the expert allowed mortgage rates to decrease due to subsidy programs from developers. “This option can become a very significant competitive advantage against the background of even higher rates,” he added.
Analysts from Expert RA also admit an increase in mortgage rates of about 1 percentage point. A rise in the price of market mortgages is also expected in FG Finam. “Current market mortgage rates have already provided for a certain tightening of monetary policy. But after today’s decision of the regulator, I think they may increase in the coming weeks by another 0.5 percentage points,” explained Igor Dodonov, analyst at Finam Financial Group.
Experts interviewed by the editorial board of RBC-Real Estate expect a new round of increase in market mortgage rates — within 1 percentage point (Photo: Victoria Votonovskaya/TASS)
Demand will continue to decline
Demand for housing loans has been declining for the second month in a row amid the cancellation of preferential mortgages for new buildings, tightening of other programs and the transition to market rates. According to “Dom.In August, mortgage issuance in Russia fell by 56% compared to August 2023 — to 375 billion rubles.
According to experts, regardless of the regulator’s decision, demand for housing loans will remain weak, mainly it will be supported by preferential programs. “The gap between the market and the preferential rate is so significant, and the market rate itself is so high that possible small changes in the key rate in one direction or another will no longer affect demand,” explained Valery Piven, Managing Director, head of the ACRA Financial Institutions ratings group.
According to the expert, mortgage issuance will be significantly lower than in 2023, which is a reflection of the curtailment of a number of benefits. “In addition, the exhaustion of the limit on the provision of family mortgages may provoke a further drop in disbursements at any dynamics of interest rates,” Valery Piven did not rule out, adding that much will depend on what programs developers will be able to offer.
An increase in the key rate carries the risk of lowering the limits on family mortgages, which may also negatively affect demand, added Tatyana Reshetnikova, deputy head of the mortgage department of the federal company Etagi. “Since it will become more expensive to subsidize banks to a preferential rate, and some credit institutions have limits that are already at the limit,” the expert said.
In general, the current market disbursements are non—standard, non-massive loans with a large down payment and borrowers’ intentions to repay loans in early payments as soon as possible, continued Yuri Belikov, Managing director of the Expert RA rating agency. But the number of such borrowers is limited, so there is a potential for further reduction of loans — by several tens of billions of rubles per month, the expert admitted. “In addition, as in all segments of retail lending, the solvent part of demand is declining due to general over—crediting and increased inflation,” Yuri Belikov noted.
According to experts, regardless of the regulator’s decision, demand for housing loans will remain weak, mainly it will be supported by preferential programs.(Photo: Frame Stock Footage / Shutterstock / FOTODOM)
Impact on prices
The consequence of falling demand for mortgages, according to experts, may be a decrease in housing prices. This trend is already being observed. For example, over the summer, prices for massive new buildings in Moscow fell by 4% at once. “In the primary market, developers are now between a rock and an anvil. On the one hand, demand is declining and, according to market laws, it is necessary to simulate it by price correction, but on the other hand, inflation risks. Developers receive money from sales only after putting the house into operation, they create difficulties with price manipulation, so we do not expect any sharp decrease in prices for new buildings,” said Tatyana Reshetnikova.
According to her, increased discounts on apartments where owners are interested in urgent sale are possible in the secondary market. Alexander Tsyganov also allows for the correction of housing prices through discounts without a sharp decrease. “We will also take into account the opportunity to put funds on a high-interest deposit and wait, as well as developers, many of whom have accumulated funds and can also wait. Therefore, there will be no serious price reduction in the coming months, unless there are additional factors,” he concluded.
A fall in mortgage demand may result in lower housing prices.(Photo: Evgeniy Vasilev / Shutterstock / FOTODOM)
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