Photo: Valery Sharifulin/TASS
To take it or not to take it — that’s the question. I mean the mortgage. However, the issue is not so simple now, something strange is happening with loans for the purchase of real estate. Firstly, despite the optimistic statements of our officials, for some reason they are getting more expensive. Secondly, banks continue to tighten the requirements for the package of documents for which the application is approved (or disapproved …). And finally, the situation in the real estate market is extremely uncertain.
The average mortgage rate in the Russian Federation began to increase consistently from June 2022 and reached 7.38% by November. In the last two months of last year, the indicator actually fell back to the level of July (6.65%), and since the beginning of the year it has started to grow again. In January, the average rate increased by 1.2 pp, in February — by 0.19 pp, in March, according to VTB forecasts — by 0.26 pp. Thus, according to the results of the first quarter, the average mortgage rate reached 8.3%,” VTB Bank said in a study.
It is not very clear what 8% of the “average temperature in the hospital” we are talking about. If you look at the offers of the same bank, then everything starts from 10.7% per annum. Yes, there are preferential programs, but go get them… Moreover, it is worth noting that VTB does not have the highest mortgage rates in the market, there are from 12% per annum and above.
Moreover, all the indicated numbers are exactly “from”. After the bank’s specialists review the package of documents you have collected, they will make a decision on the actual rate. Which may differ significantly from “from”.
“The mortgage was approved for me, but the rate of 13.5% per annum somehow does not please me at all. Plus compulsory insurance in the bank’s “subsidiary” company, de facto it turns out all 15% per annum. Although, it would seem, I am an ideal borrower — I have my own funds, enough for 20-25% of the cost of the apartment being purchased, and I get quite well. I work almost in a government agency, not in the lowest position. However, they did not deign to explain something to me, and I will not use this approved mortgage,” says Yevgeny, a young maintenance engineer.
What is the reason?
“The system can reject an application even if there are no personal claims against the client. For example, he works in an industry whose representatives have often started skipping payments in the last year. In this case, it is easier to contact another bank than to prove the unfairness of the decision,” says Dmitry Veselkov, director of the Department of Mortgage programs and bank lending at Metrium.
But there is no de jure refusal here! Although yes, there are a lot of refusals for completely incomprehensible reasons now. That’s why such strange explanations appear. By the way, if you want to use (partially) the funds of the mother capital as a down payment, then they will not give you a loan now either. Why? Financiers say that they have recently experienced problems with obtaining it — for some reason, government agencies are in no hurry to transfer these funds to banks…
Mortgages on new buildings that are in the process of construction, and not only at the level of the notorious “pit”, but almost ready-made (and ready-made, but without documents) houses are almost dead. Since now a guarantor for this loan is required everywhere. The one who will fulfill the obligations of the borrower if he is unable to do so. Or he won’t want to. As it is easy to guess, it is extremely problematic to find such a person even among relatives now. In addition, there are a number of requirements that these same guarantors must meet.
In general, we can say that financial structures are trying to minimize risks, that is, to minimize the issuance of this very mortgage. Or even to zero. Prohibitive rates, various strict conditions and other tricks are used. That is, the mortgage market de jure seems to exist, but de facto it is almost non-existent.
Nevertheless, with due perseverance and connections, it is still possible to get a loan. The only question is what — to the “primary” or to the “secondary”?
“Personally, I would now consider the secondary market. Firstly, it is much more reliable now. You buy what you see. Secondly, the prices are much lower. If you calculate, then even a mortgage at market rates in this case may be more profitable,” says Evgeny Shlemenkov, a member of the presidium of the Board of Opora Russia.
Yes, it makes sense. The price for which a person is willing to sell his real estate is limited only by his desires, whereas the manager of a real estate developer executes the order of his superiors. And although prices for new buildings have already fallen, there is still a lot to strive for.
“An affordable mortgage does not make housing affordable at all. When this shop is closed, developers will simply have no other way but to start lowering prices. Then demand will return to normal. Let me remind you that it was the super—cheap mortgage that “dispersed” the cost of new buildings again in 2022,” said Oleg Repchenko, head of the Real Estate Market Indicators analytical center.
It is curious that analytical reviews on the dynamics of real estate prices have almost completely disappeared recently. But all sorts of articles about how prices are rising and how demand is increasing appear like mushrooms after the rain. But people don’t believe them, they are guided by such an objective indicator as the income of the population. And here, as you know, everything is worse than ever.
At the moment, the real estate market is frozen in a precarious balance, ready to break down at any moment. Banks are aware of the current situation. Forecasts for a 30-50% drop in prices per square meter by the end of 2023 have not gone away, they are still relevant. And financiers, with the help of rising mortgage rates, themselves push the market down to new price lows.
“Russians should not expect residential property prices to fall. There is no need to wait for a cheaper square meter — taking into account the rise in price of some building materials, project financing, as well as based on a decrease in sales rates, taking into account the declared quality of projects, the cost of land and infrastructure. Incompetent experts mislead people with their forecasts. Right now, there is an ideal balance of prices and ways to improve housing conditions on the market,” Nikita Stasishin, Deputy Minister of Construction and Housing and Communal Services, said recently.
It remains only to add about the growth of the welfare of Russians — and there will be a “complete gentleman’s set.”
“Prices have not just increased by themselves, they have grown significantly higher than the incomes of the population. And what happens in the end? How many average annual salaries, if you don’t drink, don’t eat, put everything off, how many years do you have to put off to buy an apartment? If at the end of 2019 it was six years at the “primary”, now it is eight years. That is, what kind of accessibility are we talking about?”, — Alexander Danilov, director of the Department of Banking Regulation and Analytics of the Bank of Russia, is outraged.
Yes, realists work in the Central Bank, in fact, in commercial banks too. Prices for apartments and houses are inaccessible to buyers, so they will inevitably fall. They will fall heavily. This, as they say, is understandable to a hedgehog. The Ministry of Construction does not understand this, but this is their problem.
Thus, what mortgage rates are now and whether they are given in principle is, in fact, not so important. Because it doesn’t make any sense to buy anything now. Prices are still too high, developers are not yet running around the ceiling, considering huge losses, they still have everything ahead of them. But this will happen to them in the not very distant future. It is also worth taking into account the beginning growth of the dollar, which undermines the purchasing power of the population. We have a lot of imported goods, but there are few domestic ones, and there are no more. That’s why people think about how to survive. And not about buying new ones in chorus.
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