Long-term loans, including mortgages, will become more affordable for Russians. The inflation premium that banks include in loan interest rates will decrease. This means that interest rates will decrease. This was reported to socialbites.ca by Anastasia Skuratova, Head of the Department for Regional Analysis of the Central Federal District of the State Bank of Russia.
“Banks set their loan interest rates by taking into account not only the basic interest rate, but also expected inflation, borrowers’ credibility, and the general state of the economy. For example, banks are now pricing in relatively high expected inflation. But the target of the Central Bank while increasing interest rates is to reduce inflation to a level close to 4 percent. This means a decrease in the inflation premium that banks include in interest rates.
Skuratova concluded that this would make long-term loans, including mortgages, more affordable.
According to him, despite the increase in mortgage rates following the key interest rate hike on July 21 and August 15, the upward trend in the mortgage loan portfolio continued in the Central macro region, according to preliminary estimates.
“Mortgage loans are supported by preferential government programs whose rates do not change. You can still get a mortgage loan of up to 8% under the preferential mortgage program, which is popular among residents of the Central Federal District, ”the representative of the Central Bank said.
Skuratova also said that the higher growth rates in mortgage loans are due to the spread of mortgages to riskier client groups. The result is an increase in loan debt. Therefore, from October 1, the Central Bank of Russia increases the premiums on risk ratios for mortgage loans. The Central Bank representative said this would limit the risks of borrowers and banks.
Skuratova predicted that in 2023-2024 preferential government programs will continue to support mortgage lending. However, the decision of the Central Bank of Russia to increase premium/risk ratios may lead to a more balanced growth in mortgage loans.
On August 15, at an unscheduled meeting, the Central Bank Board of Directors decided to raise the key interest rate by 350 basis points from 8.5% to 12% annually. This decision was taken in order to limit the risks to price stability. Prior to that, the rate was increased by 100 basis points to 8.5% on 21 July. After the Central Bank’s decisions, one out of every two banks in the top 30 increased their housing loan interest rates by 1.5-3 points on average. The average mortgage rate reached 14% annually.
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