According to the Central Bank, the second quarter of 2023 saw an average of 1.8 loans per mortgage borrower. A year earlier, the figure stood at 1.6. In its information and analytical bulletin, the Central Bank noted that some bank clients use consumer loans to fund mortgage down payments. Six point two percent of borrowers sought these funds exceeding 100 thousand rubles, up from 3.5 percent a year before. This trend concerns the Central Bank of Russia; as a result, borrowers could be barred from securing a mortgage until the consumer loan is repaid.
The regulator also advocates raising down payments for new buildings. The Federal Reserve reportedly indicates the market shows signs of overheating, evidenced by price gaps between primary and secondary housing markets. In September 2023, the down payment for new apartments rose from 15% to 20%.
“It is easy to predict that the Central Bank will accept this move. To realize such a scenario, the Bank of Russia will not need special efforts. If a borrower has outstanding debts, they will be barred from taking a mortgage. Increasing the down payment is no longer a problem. The Central Bank has already adjusted its thresholds. The mechanism is proven and will operate again,” stated Valery Emelyanov, stock market expert at BCS World of Investments.
Ruslan Syrtsov, General Director of the Metrium company, noted that only a small number of banks now deny mortgages to borrowers with consumer loans. He believes that new measures will reduce credit default risk and support macroeconomic stability in Russia.
Vladimir Shchekin, founder of the Rodina development group, suggested that the restrictions could affect more than 40 million Russians, the bulk of the economically active population. “In total, about 21 million Russians have at least one loan, another 10 million have two loans, and about 11.2 million carry three or more loans,” he explained. Shchekin added that the rise in mortgage down payments will sharply cut demand for mortgages. “More than half of borrowers currently take a mortgage with a payment below 20 percent. Its growth will push Russians to save longer for mortgages, which is hard in an inflationary environment,” he said.
What will be the mortgage loan interest rates?
At the same time, Emelyanov does not foresee a rise in interest rates on loans for new buildings. “As long as government financing supports these loans at reduced rates, increases are unlikely. There are no signs that subsidies for new buildings will be fully removed, though tighter lending conditions could appear,” he noted.
Currently, several state mortgage programs exist in Russia: “Preferential mortgage” at 8% per year, “Family mortgage” at 6%, “IT mortgage” at 5%, and “Far Eastern mortgage” at 2%. Emelyanov added that banks will likely reserve these programs for the most needy borrowers, such as large or young families and new immigrants, while other borrowers may face market-rate loans with hopes of later refinancing at lower costs.
Sovcombank’s chief analyst Natalya Vashchelyuk predicted that mortgage rates could rise after the Central Bank’s key rate increases to 15%. Syrtsov estimated that average housing loan rates might reach around 17%. “If prices in the secondary market do not ease, the rate level may seem steep. The average price per square meter in Moscow’s secondary market is about 267 thousand rubles. A person earning 130 thousand rubles monthly with a 15 percent mortgage rate could only afford roughly 24 square meters, even with half of income going to payments,” he explained.
What will happen to housing prices?
Domklik reported that the average price per square meter for new buildings in Russia was 120,586 rubles at the end of September, while the secondary market averaged 100,958 rubles. regional variations were notable: the Amur region at 150,703 rubles per square meter and Ivanovo at 78,031 rubles. In Moscow and St. Petersburg, prices stood at 370,596 and 250,676 rubles respectively, with Moscow and Leningrad regions at 192,340 and 155,151 rubles. Ingushetia recorded the lowest at 53,200 rubles per square meter, while Kemerovo and Kurgan regions showed costs of 89,286 and 70,636 rubles. A 60-square-meter apartment could cost over 9 million rubles in Amur, about 4.7 million in Ivanovo, over 22 million in Moscow, and above 15 million in St. Petersburg. The Moscow region averaged 11.5 million, the Leningrad region 9.3 million, and St. Petersburg over 15 million rubles; Ingushetia, Kemerovo, and Kurgan stood at roughly 3.2 million, 5.4 million, and 4.2 million rubles respectively.
“Primary housing prices will rise at least with inflation, while the secondary market may experience a slight correction as buyers move toward new builds,” Syrtsov commented. Emelyanov added that prices in housing are unlikely to keep rising. “Without credit support, the public cannot buy flats at current prices. At present rates, most people cannot afford mortgage payments,” he stated. The expert expects demand for mortgages to dip for a period. “Alternative schemes may emerge, often with partial additional payments, where overall costs do not rise dramatically. Renters or people living with relatives will remain. Fewer people will upgrade their living conditions with time. If rates stay high for six months to a year, this trend will persist,” Emelyanov predicted. Cian’s chairman noted rental demand has grown, with rental payments now nearly half of a 15% mortgage servicing, and the gap could widen for loans at 17% per year. Analysts, including Alexey Popov, observed that the school year’s rental interest peak may extend.
Shchekin added that demand for rental housing in major cities rose by about 50%, while supply declined by 20-30%. He stressed that affordable rental options are nearly gone and rents have risen by around 30%, a trend he expects to intensify.