The Central Bank announced that beginning May 1, 2023 it would raise the premiums used in risk calculations for housing loans. These adjustments specifically affect loans tied to joint construction arrangements for housing purchases. The regulator’s message lays out this policy clearly.
From the regulator’s note, the maximum margin level of 1.5 for down payment mortgages with 10 to 15 percent upfront is reserved for borrowers whose debt load ratio sits in a band from 0 to 30 percent up to 80 percent. For borrowers whose debt load ratio exceeds 30 percent and reaches more than 80 percent, the minimum premium of 0.5 is applied to housing loans with a 20 to 30 percent down payment.
The Central Bank of Russia stated that the aim of this measure is to curb risks for mortgage borrowers and for the financial institutions active in the market. The regulator highlighted that the share of home loans extended to borrowers with debt loads over 80 percent soared to about 44 percent in late 2022, up from around 36 percent in the prior quarter, based on data from the central statistics agency. It also noted a rise in low down payment loans, climbing from 48 percent in the third quarter to about 53 percent in the fourth quarter, signaling a shift in lending standards and borrower profiles. [Source: Central Bank communications]
According to the regulator, the spread between bank programs and developer programs has grown, with some offerings embedding higher real estate prices relative to the same nominal loan. In practical terms, with a 30 percent initial payment under a joint construction contract, the loan-to-value ratio can reach 90 to 100 percent of the pledged value. If the initial payment is only 20 percent, the LTV can climb to roughly 100 to 115 percent. These figures reflect the regulator’s concern about how varied financing structures influence collateral values and borrower exposure. [Attribution: regulator briefing]
The message also points out that the proliferation of joint programs between banks and developers has pushed overall house prices in newly built segments higher, widening the gap with secondary market prices. By the end of 2022 the pricing premium between new builds and the secondary market reportedly reached a record level, aligning with Rosstat metrics cited by the regulator. This dynamic raises questions about price sustainability and the health of borrower portfolios in the event of tighter financial conditions. [Data reference: Rosstat estimates]
The regulator warned that if a bank client wishes to sell a property, the sale price on the secondary market may fall short of covering the outstanding mortgage debt. In such cases the initial down payment could be forfeited, and the bank would face higher risk exposure as sales of properties under primary market prices might not fully offset losses. The concern is that lenders may need to hold more capital against such loans or adjust underwriting standards to maintain balance sheet resilience. [Insight note: regulator analysis]
In an additional development, the Central Bank signaled a tightening stance on mortgage allowances for purchases made under joint construction schemes, a topic later discussed by business media. The emphasis remains on aligning risk appetites with prudent capital reserves, ensuring lenders have sufficient buffers to absorb potential losses. [Contextual coverage: market observers]
Industry experts cited in the coverage note that higher risk weights compel banks to hold greater capital against these assets. This, in turn, can translate into higher average lending rates in the new homes segment and potentially dampened demand for such properties as borrowing costs rise. The overall effect could be a recalibration of lending strategies across lenders and developers, influencing the pace and structure of future housing projects. [Expert commentary: market analysis]