Major banks – Moscow Credit Bank, Dom.RF, Rosbank, MTS Bank, Zenit and Absolut Bank – are ready to lower mortgage rates in August. Its representatives reported this to socialbites.ca. Credit institutions announced that they will adjust the current conditions following the Central Bank’s interest rate cut, which will take place on July 22, according to the estimates. As socialbites.ca previously reported, the regulator may reduce the rate from the current 9.5% to 8.5-9% per year.
“We expect the organizer to reduce the key rate by 0.5 percent at the next meeting. Mortgage rates will also be reduced by a similar amount.
As part of the campaign – from July 20 to August 7 – the bank has already reduced the rate under the secondary residential real estate purchase program by 0.5 percentage points. As a result, the minimum rate for the bank’s own programs has returned to the single-digit range – 9.69%,” said Anton Pavlov, vice president of Absolut Bank.
Other lenders have also announced their intention to lower mortgage rates, but have not specified specific discount parameters.
“MTS Bank” is ready to revise mortgage interest rates depending on the drop in the key. The new rates will depend on the level of decline in the indicator, said Tatyana Akramova, head of mortgage lending at MTS Bank.
A similar position was expressed in other banks. According to the forecasts of Absolut Bank, MTS Bank and Sovcombank, the weighted average mortgage rate in August will be 10% – 9% by the end of the year.
What will the rate cut bring?
Tatyana Shkolnaya, Deputy Director of the Institute of Tax Management and Real Estate Economics of HSE, said that the decision of banks to reduce mortgage rates in August is expected.
“Mortgage rates often react instantly to changes in the key rate. Most likely, it will be the same this time,” he explained.
Vasily Karpunin, Head of Information and Analytical Content at BCS World of Investments, predicted a significant increase in real estate demand as part of the decline in rates.
“Reducing the rate by 1 person. “In the current conditions of a falling floor, it can cause demand for mortgage products to increase by even tens of percent.”
Ksenia Yakushkina, director of banking ratings at the Expert RA agency, agrees with him. “As evidenced by the recovery in demand in June, the cost of housing loans is at a fairly comfortable level even now. However, a new decrease in rates will lead to an additional increase in the volume of loans, ”says Yakushkina.
At the same time, Shkolnaya noted that comfort is a relative concept.
“Ultimately, the borrower needs housing, not a mortgage. Mortgage is just a tool. Now the level of comfort will be determined by three indicators: the level of real income, the price of real estate and the level of the mortgage rate. Comfortable conditions are when a family spends more than 40% of their income on the maintenance of the house (mortgage or rent), including electricity bills. Housing prices have risen a lot during the pandemic and now real incomes are falling. Therefore, for most Russian families, a rate of 9-10% on a mortgage can be called protective.
Associate Professor GV Plekhanova Tatyana Skryl from the Department of Economic Theory of the Russian University of Economics noted that now the volume of supply in the real estate market has significantly exceeded the value of the same period last year – about 35%. She added that the supply of flats in the market is much higher than the demand.
“The negative impact on mortgages is that the market expects further rate cuts and pent-up demand for mortgages builds up. Another important factor in the weakening of the mortgage demand is the decrease in the incomes of the population. But in general, the positive factors are stronger. Therefore, we can expect a recovery in the mortgage market after the April-May collapse,” he said.
Source: Gazeta
Barbara Dickson is a seasoned writer for “Social Bites”. She keeps readers informed on the latest news and trends, providing in-depth coverage and analysis on a variety of topics.