Mortgage Trends in Moscow and Central District Markets in 2023–2023

According to the Central Bank, the Moscow region saw its highest mortgage issuance in August at 166.1 billion rubles, following a prior peak in December 2021 at 154.1 billion.

Mortgage lending surged in September as lenders anticipated tighter aid programs and borrowers acted to secure loans at pre-approved rates before changes in base rates. A similar pattern emerged in August. Despite these fluctuations, the weighted average interest rate on ruble mortgages across Russia dipped by as much as 0.5 percentage points in September compared with June 2023, when preferential programs were included. The Bank of Russia’s Elena Buzdalina noted that rates fell to 7.9 percent on average.

In Moscow and the Moscow region, housing loan rates declined by around 0.5 to 0.6 percentage points, resting near 8 percent and 7.9 percent respectively.

Officials attributed this shift to a growing share of family mortgages within total housing loan volumes and a shift in demand toward new housing.

The Central Bank reported that in September this year Moscow and the surrounding region issued 11,056 concessional mortgage loans totaling 85.2 billion rubles and 9,717 Family Mortgage loans totaling 77.7 billion rubles.

Throughout the year, the number and value of concessional mortgages climbed by 51 percent and 42 percent, respectively. Family loans rose by 211 percent in number and 222 percent in volume, effectively tripling in both dimensions.

In the Moscow region alone, banks granted housing loans totaling 473.8 billion rubles in the July to September period, a 1.6-fold increase from the third quarter of 2022 and 2021. The share of overdue debt stood at 0.5 percent of total loan volume, slightly above the national average of 0.4 percent.

During that same July to September window, housing loans rose 1.7 times year over year to about 73 thousand loans. In Moscow, 40.1 thousand real estate purchase loans were issued worth 292.5 billion rubles, while the Moscow region saw 32.9 thousand loans totaling 181.3 billion rubles.

Across Russia, the average mortgage loan in the third quarter of 2023 fell 9 percent in Moscow but rose 4 percent nationwide, with regional averages around 5.9 million rubles in the Moscow region and 7.3 million rubles in the capital. The all-Russia average reached 3.9 million rubles.

Refinancing activity also remained robust: the Moscow region saw 956 refinanced loans worth 5.9 billion rubles in the third quarter of 2023, nearly double the same period in 2022. The press service of the Central Bank’s Main Directorate warned that demand for refinancing could ease further as market-program rates rise. Refinancing means taking out a new loan to repay an existing one.

Escrow accounts play a key role in protecting funds for buyers in shared construction projects. In the Moscow region, the number of escrow accounts opened by participants rose by 13.3 percent in the third quarter of 2023, surpassing 538 thousand, according to the Central Bank’s regional press service. The escrow mechanism ensures funds are held in a bank until project completion, after which ownership rights are transferred to buyers. If a construction firm fails, each participant can claim a full refund of their invested amounts.

As of October 1, 2023, equity owners in housing under construction in the Moscow region had deposited 4.7 trillion rubles into escrow accounts, a rise of 13.4 percent from the preceding months. About 254.8 thousand escrow accounts had already been announced for completed projects, with more than 2 trillion rubles transferred to developers or used to repay construction loans. The total limit on existing loan commitments signed by banks and developers in the third quarter increased to 8.4 trillion rubles, up 7.9 percent from the prior period.

What are the advantages

Some observers attribute strong mortgage demand in the Moscow region to rising household prosperity among residents who face spending restrictions elsewhere. This includes spending on real estate, travel, and premium services, as noted by Konstantin Kharchenko, an associate professor in municipal administration at a major federal government university.

The head of a city financial control department added that heightened mortgage activity supports housing demand, which in turn stimulates construction and related industries. Dmitry Osyanin, a regional economist, argues that a large loan volume can spur improvements in the financial system by pushing banks to refine lending and servicing practices, potentially boosting sector revenues over time.

Osyanin also explained that rising borrower numbers have spurred intensified competition among lenders, leading to more favorable terms and competitive interest rates for borrowers.

What are the disadvantages?

Still, high borrower activity can raise the risk of loan non-payment if debt loads outstrip income. Some households may find themselves in a danger zone if repayments consume too large a share of income.

Kharchenko warned about negative outcomes for borrowers who underestimate or overlook their repayment capacity amid rising prices for essential goods and potential life shocks. He cautioned that continually rising total mortgage debt warrants close monitoring by regulators.

Osyanin warned that a flood of high-debt lending could lift debt-service burdens and fuel a housing price surge, potentially overheating the market.

Industry analyst Andrei Loboda noted that many borrowers allocate at least 40 percent of monthly income to servicing debt, raising concerns about the stability of housing markets if such trends persist.

BCS World of Investments’ Mikhail Zeltser believes high mortgage rates will shape demand in the coming months, with some buyers waiting for prices to adjust before committing.

How many mortgage loans were issued in the Central Federal District?

In the third quarter of 2023, banks in the Central Federal District issued 707.4 billion rubles in mortgage loans, up 1.7 times from the same quarter in 2022 and 1.6 times from 2021, according to the regional Bank of Russia press service.

The number of housing loans in the district during July–September reached 142.1 thousand, 1.7 times higher than the previous year. The average loan size for the quarter was 5 million rubles, down 4.5 percent from the prior year, while the national average rose 4 percent to 3.9 million rubles.

Among the Central Federal District regions excluding Moscow and the Moscow region, Voronezh reported the highest nine-month loan volume at 20,887 loans totaling 68.4 billion rubles, whereas Kostroma posted the lowest with 5,884 loans and 16.5 billion rubles.

In refinancing, the third quarter saw 1,259 loans worth 6.8 billion rubles, roughly half the July–September 2022 level. A continued decline in demand for mortgage refinancing is expected due to higher market-program rates.

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