Growth dynamics. Why an increase in mortgage loan interest rates is inevitable The Central Bank may increase the interest rate again in October 10/01/2024, 12:00

For economic reasons

The head of the Bank of Russia, Elvira Nabiullina, has already made it clear that the current monetary policy will be maintained and that the regulator may increase the key interest rate again at the next board meeting in October.

Let us recall that in September the Central Bank of the Russian Federation decided to increase the interest rate to 19%. At that time, most financial analysts were predicting such a step towards increase. True, predictions differed; There were expectations of 2% or more in the region. But the regulator apparently left a reserve and decided to do everything gradually.

“We increased the rate to 19 percent in September and we do not rule out that it will increase in October as well.” stated Central Bank Governor Elvira Nabiullina at the International Banking Forum.

The regulator chairman added that the Central Bank aims to achieve the 4% inflation target by the end of 2025.

At the same time, annual inflation may exceed the July estimate of 6.5-7% by the end of 2024. it was said In a message the agency referred to the Central Bank.

If you look at the past reactions of large banks to the actions of the Central Bank of the Russian Federation regarding the key interest rate or expectations from the regulator to increase the indicator, the reaction was not long in coming. Lenders often increase mortgage rates in advance, without waiting for the regulator’s decision.

Let’s look at September, the same VTB almost always acts before the key decision. The bank changed the mortgage terms on September 25, increasing the base rate by 1.5 percentage points. Loans for flat purchase can be used at an annual rate of 22%, taking into account bank discounts.

As written by the credit institution itself RBCHe explained that the actions are related to the growth of the key interest and high expectations for its further increase, so the cost of raising funds for banks has increased significantly.

Wait or buy

Sber has not yet announced another increase, but it is possible that this will happen soon. The bank generally acts cautiously and allows those who want to close the deal at the old rates, but as we have seen, the economy dictates its own rules, forcing banks to increase interest rates on mortgage products.

In fact, the increase in mortgage interest rates is also affected by the situation in OFZ (federal loan bonds). The fact is that recently there has been a tendency for an increase in their profitability for a period of up to 5 years, and a gradual decrease in profitability for a period of more than 10 years.

In addition, average offered rates for market mortgage programs are priced at a five-year yield of OFZ + 5 percentage points. Although at lower rates, this difference does not exceed 3 percentage points. This suggests that mortgage interest rates are now further disconnected from OFZ yields and banks are seeking to remortgage, for example, in terms of pricing loan products, as they do not know how long the period of high interest rates will last. as the credit quality of the incoming customer flow.

If you add up all these factors, you should not expect a sudden interest rate cut in the short term. On the contrary, it is possible that banks will continue to increase interest rates and housing loans will become more expensive. Of course, we must appreciate here that state support programs continue to be implemented for certain categories of borrowers.