Experts: Russians get into debt to save up for a down payment on a mortgage
Russians are running out of free money — they get into debt in order to save up for a down payment on a mortgage. According to the Bank of Russia, the share of such borrowers doubled in the second half of 2022. At the same time, issuance of mortgages in the same period was accompanied by an extreme growth in terms of lending: the share of 30-year loans exceeded 40% of issuances against 20% a year earlier. According to experts interviewed
As high-quality borrowers have already solved their housing problem, a less solvent segment is queuing for a mortgage. At the same time, real estate prices have risen sharply, especially in the primary market. As a result, the average mortgage loan term is growing in order to soften the terms of the monthly payment and increase the available loan amount.— Igor Galaktionov, an expert on the stock market at BCS World of Investments, explains this trend.
Associate Professor of the Department of State and Municipal Finance of the PRUE G. V. Plekhanova Meri Valishvili believes that the increase in lending terms is associated with a decrease in real disposable income of citizens at an inflation rate above the target value set by the Bank of Russia, as well as with an increase in interest rates of banks.
The cost of consumer loans significantly exceeds mortgage rates, and such a “move” clearly will not benefit the borrower, she continues.
I believe that this is due to the requirement to increase the size of the down payment, in connection with which many potential borrowers are forced to save up for the down payment in this wayValishvili believes.
The growth in terms of lending has led to a shift in the age of contractual loan repayment. In the fourth quarter of 2022, about 41% of the volume of disbursements came from loans for which at least one of the co-borrowers was over 65 years old at the time of the scheduled mortgage repayment. In the fourth quarter of 2021, this share was 24%.
In addition, Central Bank statistics show an increase in the debt burden of mortgage borrowers: the average number of outstanding loans from borrowers who took out a mortgage in the fourth quarter of 2022 reached a maximum for the period under review — 2.2 units. (in the fourth quarter of 2020 — 1.4 units), and the debt for each co-borrower — 2.6 million rubles (an increase of 17% per year, which is higher than the growth rate of household income — 12.4%).
At the same time, the Central Bank noted that mortgage borrowers became the main driver of the growth of the banking portfolio in 2022 (the portfolio grew over 3 trillion rubles last year), while unsecured lending is growing slowly (the debt of borrowers without mortgages grew by 0 ,1 trillion rubles.)
Against the background of the introduction of restrictions by the regulator on mortgages with a low down payment, banks are forced to raise rates on such loans, explains Nadezhda Karavaeva, junior director for banking ratings at Expert RA. As a result, potential borrowers will be forced to take consumer loans for a down payment in order to reduce the mortgage rate.
In addition, consumer loans for a down payment can also be taken by borrowers taking mortgages under programs from a developer with cashback.
However, consumer credit also leads to an increase in the debt burden of the borrower, which can also lead to an increase in the rate by the banksays the economist.
Representatives of the development industry do not see serious risks in these trends. Prime Life Development Managing Partner Denis Konovalenko believes that taking consumer loans for a down payment will not have a serious negative impact on the mortgage lending market. Today, the conditions of preferential programs have changed, the amount of the down payment has become higher and people refuse to make risky financial decisions, he notes.
Moreover, due to the modification of programs, banks are tightening requirements for customers in order to avoid the risk of public debt burden and ensure financial stability. Due to the fact that the market for preferential mortgage lending has become more orderly, it has been possible to get rid of unnecessary excitement, while maintaining the availability and attractiveness of conditions. Developers, in turn, continue to additionally announce various profitable offers, which allows them to provide customers with the most comfortable conditions for acquiring real estate, Konovalenko noted.
Tatyana Boeva, head of the mortgage lending department at Granel Group of Companies, attributes this to the peculiarities of the situation on the housing market in the second half of the year, when subsidized mortgage programs with comfortable mortgage rates were still in effect. And buyers sought to purchase an apartment in a new building at the most favorable conditions, using consumer credit for the first installment.
In addition, in the second half of the year, developers actively offered special promotions with a reduced cost per square meter for a number of lots. And just the increased interest on consumer credit was compensated to one degree or another by a discount on an apartment.
The audience share of 7%, which used consumer credit for the first installment, is not too significant for the market. The balance of risks in the mortgage lending system remains under controlshe is sure.
Vadim Butin, Head of the Mortgage Lending Department at Glavstroy-Nedvizhimost, proposes as support a targeted reduction in the amount of the minimum down payment for certain categories, for example, young families, young professionals, as well as for those who want to improve their living conditions by selling their own housing.
It is likely that the innovations in the regulation of mortgages, which will come into force this year, already take into account the risks of an increase in the debt burden of the population and will cool the demand for mortgages, Nadezhda Karavaeva believes. The slowdown in demand will be affected both by tighter regulation, leading to higher rates for less quality borrowers, and by raising the down payment bar. In addition, investment demand for mortgages is shifting to other financial instruments, which also leads to a cooling of demand in the segment, she added.
Even more serious consequences will result from the tightening of the policy of the mega-regulator regarding preferential mortgages from developers at an ultra-low interest rate, warns Meri Valishvili.
The real estate market is already skewed towards supply, and cheap New mortgages (albeit at a higher cost of the property itself) can overheat the market even moreshe emphasized.
Similar concerns were also expressed at the beginning of the year by the Russian Ministry of Construction. In this regard, tightening the conditions for issuing mortgages by the Bank of Russia will not help improve the situation on the market, she concluded.
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