Beginning June 1, Russian banks will steadily raise the minimum down payment required for new mortgages. The central bank released the policy in a late-March statement, but it has only recently drawn broad attention.
According to the regulator, there will be a gradual increase in the minimum down payment: 20% starting June 1, 2023, and 30% commencing January 1, 2024.
Additionally, banks will be required to apply premium risk ratios to mortgage loans for newly built homes. These allocations are to be implemented within one year after the house enters service at the construction stage.
During discussions on the issue, bank representatives voiced concerns about how easily the new rules could be put into practice. In response, the regulator allowed market participants to choose whether the one-year period should be counted from the date the project received permission to be put into operation or from the date the pledge for the finished housing was registered for such a loan.
Maxim Osadchiy, head of the analytical department at BKF Bank, warned that the higher down payment requirement would likely dampen demand for mortgages and cool the broader real estate market.
He stated that higher down payments would exclude borrowers who lack sufficient funds, hitting the least affluent segments and those in the subprime mortgage category the hardest. In an interview with socialbites.ca, Osadchiy argued that many borrowers in lower-income groups turn to more expensive consumer loans or microloans to cover the down payment, transferring risk from the mortgage sector to related markets.
Osadchiy also noted that tighter mortgage controls could contribute to lower housing prices, but warned that excessive tightening might trigger a broader mortgage crisis. He emphasized that the impact would not be limited to conventional loans; it would also affect preferential programs where the down payment is often reduced.
Legally, the first mortgage payment today cannot be less than 10% of the purchase price. Banks typically set the down payment benchmark at 20-30%. Individuals who can commit larger sums, such as 40-60% of the home price, often qualify for more favorable loan terms.
Russia also operates several preferential mortgage programs in 2023, supported by government subsidies for eligible borrowers. These programs generally feature lower down payment requirements.
For instance, a preferential mortgage for IT professionals enables a down payment of just 15% of the home price. The Far East programs, family mortgages, and new-build preferential loans offer the same minimum threshold. Rural mortgages sometimes permit a down payment as low as 10% of the home price, expanding access to homeownership for rural buyers.