The Central Bank said that as of May 1, 2023, it will increase the premiums in risk ratios for housing loans. We are talking about loans for the purchase of housing under the agreement to participate in joint construction. This is specified Message regulator.
It is understood from the regulator’s message that the maximum margin level – 1.5 – for down payment mortgages of 10-15%, is set for borrowers with debt load ratios above 0-30% to 80%. For borrowers with a debt load ratio of 0-30% to more than 80%, the minimum premium level – 0.5 – is applied for housing loans with 20-30% down payment.
The Central Bank of Russia announced that the corresponding measure is designed to limit the risks of mortgage borrowers and Russian banks.
In particular, the share of housing loans provided by banks to borrowers with a debt load of more than 80% (when 80% of income goes to mortgage payments) reached 44% in the fourth quarter of 2022 against 36, according to the Central Bank. percent in the third quarter The regulator also noted that the share of low down payment mortgages increased (up to 20%). The rate, which was 48% in the third quarter, reached 53% in the fourth quarter.
“In addition to worsening lending standards, the DDU (financing under an equity contract) market is characterized by a massive spread of joint programs by banks and developers, which include an increase in housing prices relative to the purchase of the same property. One loan. As a result, with an initial payment of 30% under the contract, the ratio of the loan to the real value of the collateral (LTV) is 90-100%, and with an initial payment of 20% this figure reaches 100-. 115%,” followed by the Central Bank message.
The regulator pointed out that the spread of banks’ and contractors’ joint programs has led to an overall increase in house prices in the newly built market, increasing the gap between prices and the secondary market. Stating that it has reached the maximum level of 30% by the end of 2022, according to Rosstat, the Central Bank included these data in its message.
“If a bank client wants to sell a house, they may face a loss because prices are lower in the secondary market and the cost of the flat may not be enough to cover the mortgage debt. Also in this case the first payment will be forfeited. Banks are increasing their exposure to primary market mortgage loans because if the borrower defaults, it will be impossible to sell the flat at primary market prices,” the regulator said.
The Central Bank will increase the mortgage allowance for the purchase of housing within the scope of the joint construction participation agreements, 19 February knowledgeable newspaper “Kommersant”.
As stated in the article, the higher the bank’s risk ratio, the greater the stock of capital required to meet it, ie the less the bank can hold such assets on the balance sheet without raising capital. Experts interviewed by the newspaper agreed that the use of the additional tax could lead to an increase in weighted average lending rates in the new buildings segment as a whole, which would eventually reduce demand in the segment.