If the Central Bank keeps its rate elevated at a high level, the volume of new mortgages is likely to drop sharply in 2024, potentially by two to three times compared with 2023. This projection stems from a market assessment shared with socialbites.ca by a leading regional economist and communications director who noted that mortgage issuance hit four-year lows in 2023. The current environment, marked by substantial borrowing costs, is tightening credit conditions and cooling demand across the housing market.
The primary drivers behind this slowdown are clear. Banks continue to charge higher interest on commercial mortgages, with rates reaching around 25 percent in some cases, creating a barrier for developers and buyers alike. In addition, loan programs designed to support first-time buyers under preferred terms have behaved more conservatively as lending standards tighten, including a higher minimum down payment requirement that has risen to 30 percent of the purchase price for new housing projects. These shifts collectively dampen overall housing affordability and curb demand among buyers who rely on financing to close deals.
Analysts warn that the trend will persist as long as borrowing costs remain elevated. The planned expiration, and possible cancellation, of preferential mortgage programs later in the year is expected to exert additional downward pressure on mortgage market activity. Growth in demand could resume only if the central bank signals a downward revision of interest rates, which may come, if at all, only during the autumn months. This timing reflects broader expectations in financial markets that policy normalization will take time and depend on a careful assessment of inflation, growth, and housing market overheating risks.
Beyond the immediate effect on loan volumes, the lingering effect of high rates appears to have cooled risk appetite in the credit market. Lenders have become more cautious, prioritizing borrowers with stronger credit profiles and larger down payments. This shift reduces liquidity for marginal buyers and slows the turnover of housing stock as inventories reprice to reflect higher carrying costs. While some observers anticipate a stabilizing pullback, the current trajectory points toward a more tempered, sustainable pace rather than a rapid rebound in demand.
In the early months of the year, housing loan issuance in the country reached a notable downturn, registering a decline toward its lowest level in four years. In the January–February period, financial institutions approved a combined total of hundreds of billions of rubles in housing loans. The amount issued during this interval was lower than any comparable period since 2020, underscoring the severity of the tightening cycle. The only prior instance with similar weakness occurred during the same two months of 2020, highlighting a pattern of vulnerability when macro conditions tighten promptly and rates stay high.
There is ongoing political discussion about mortgage rejections, as lawmakers weigh the implications of tightening credit conditions on households and the broader economy. The dialogue reflects concerns about affordability, access to housing, and the potential long-term impact on housing market dynamics if credit remains constrained. Market participants are watching policy signals closely, seeking clarity on whether any easing measures might be introduced to support credit flow while maintaining financial stability. [Cited analysis across market reports and economic briefings, attribution forthcoming in sector summaries].