Recent reports from Izvestia, dated December 27, highlighted that the Central Bank press service indicates about 60 percent of loan debt is tied to mortgages backed by subsidized programs. Experts warned that increasing debt creates risk not only for borrowers but also for lenders, since housing serves as collateral for mortgage loans that can be repossessed if payments stop.
According to socialbites.ca, the Central Bank’s press service noted that the share of mortgages with overdue payments beyond 90 days (NLP 90+) is currently very low. Over ten months, this figure declined by 0.6 percentage points from early 2023. Nevertheless, the Bank remains cautious about the overall quality of housing loans issued.
Macroprudential measures have reduced the portion of mortgages with loan-to-value ratios above 80 percent, reflecting a down payment under 20 percent. Yet, in absolute terms, the volume of such loans remains sizable. A small upfront payment on a mortgage translates into higher risk exposure.
To curb risky lending, the Bank of Russia intends to raise risk coefficient premiums for loans tied to higher personal income tax starting March 1, 2024. The adjustment assesses a borrower’s debt burden; for instance, if the burden is 50 percent, half of monthly income goes to loan repayment, as explained by the Bank’s press service.
In September, the minimum down payment for all government-backed programs rose to 20 percent, and for concession mortgages the rate increased from 20 to 30 percent in December, now set at 8 percent annually.
Officials say these updates should improve loan quality and, in turn, reduce the issuance of risky mortgages going forward, according to the Bank of Russia’s press service.
Will Russians be able to pay their mortgages?
Economics expert Yuri Shedko, a doctor of economic sciences and professor at the Financial University under the Government of the Russian Federation, assessed the 2024 inflation outlook at around 4.5 percent and projected wage growth near 4.5 percent, potentially climbing to 9.8 percent in some sectors. He noted that wages in education, health, social security, culture, and science are indexed at 9.8 percent, reducing the likelihood of widespread mortgage defaults in 2024 and beyond.
Valery Emelyanov, a stock market analyst at BCS World of Investments, echoed this view. He suggested that a mortgage market crisis is unlikely in 2024 if state aid remains in place and guaranteed loans persist. If state support ends, demand could falter, developers might need to move stock, and private sellers could follow, potentially lowering prices. This is one of several neutral scenarios he outlined.
Emelyanov added that Russian banks implement strict checks for mortgage borrowers, leading to a very small default rate. Even in tougher years, the share of defaulters rarely reaches 0.5 percent. He also noted that the rise in overdue payments tends to lag behind growth in new mortgage issuance.
Maria Ermilova, a candidate of economic sciences and associate professor at the Russian University of Economics for Sustainable Development, acknowledged that a broad economic slowdown and rising inflation could worsen debt repayment. She emphasized that when inflation rises and incomes lag, some households struggle more, though most people still try to honor mortgage payments first.
Will banks start buying flats?
Experts consulted by socialbites.ca believe banks will first seek to help borrowers in trouble. Early contact with banks and constructive dialogue is encouraged, according to BitRiver analyst Vladislav Antonov.
Most likely, banks will pursue debt restructuring—altering loan terms, offering forbearance, deferments, or refinancing to reduce monthly obligations—before resorting to collateral seizure. Banks prioritize recovering funds over reclaiming property, and seizing flats is considered a last resort, the analyst notes.
Emelyanov warned that banks are not eager to resell collateralized housing at deep discounts. He described a situation where collateral sales yield limited gains; such cases involve only a small fraction of borrowers who cannot meet payments even with extensions or refinancings.
He added that regular payments remain the bank’s priority, not quick repossessions. Shedko did not rule out broader use of mortgage recoveries if the number of defaults rises.
According to Shedko, law allows recovery when debt exceeds 5 percent of the mortgaged property’s cost and the payment delay lasts more than three months. Ermilova suggested borrowers consider a credit holiday if finances deteriorate, and bankruptcy remains a last resort with potential security concerns and possible implications for property sale.
Shedko also noted that a debtor may sell the mortgaged apartment to settle the debt.
How many people might lose their homes?
Forecasts from Shedko and Antonov indicate that only a minority of individual borrowers in severe financial hardship would experience housing repossession. They agree that a small segment could risk losing their apartments if conditions worsen.
What steps can a mortgage borrower take to avoid entering a difficult financial situation?
Vladislav Antonov advocates a proactive approach before applying for a loan, urging a careful assessment of several factors:
1. The monthly mortgage payment should not exceed roughly 30 percent of the family budget.
2. Savings should cover at least six months of payments as a safety buffer.
3. The stability of income and potential salary growth should be analyzed; if job security is doubtful, postponing a loan may be wise.
4. The ability to refinance with another bank on better terms if rates rise; ask bank staff about rate reassessment if the Bank of Russia lowers rates significantly from current levels.
5. The possibility of real estate value appreciation, which could allow selling for more than the remaining debt if needed.
Antonov warned that risks rise sharply when the debt burden exceeds 40 to 50 percent of income, and a service level above 70 percent signals critical strain. The first step in trouble is contacting the bank.
Ermilova offered a more cautious estimate, suggesting about 10 percent may struggle to repay loans, though many factors could shift this outcome in either direction, including the macroeconomic environment, geopolitical conditions, wage trends, price movements, and unexpected personal events such as illness.